Year end report, January to December 2015

Year end report, January to December 2015 Akelius Residential Property AB (publ) Year end report, January to December 2015 • • • • • • • • • • • R...
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Year end report, January to December 2015

Akelius Residential Property AB (publ)

Year end report, January to December 2015 • • • • • • • • • • •

Rental income SEK 4,339 million (3,602) Rental income increased by 4.3 per cent (3.4) for comparable properties Operating surplus SEK 2,175 million (1,882) Operating surplus increased by 4.0 per cent (7.1) for comparable properties Change in property value SEK 8,026 million (1,412), or 13.9 per cent (3.2) Change in value of derivative instruments SEK 533 million (-1,149) Net profit before tax SEK 9,206 million (852) Earnings per share SEK 2.33 (0.15) Investments in property holdings SEK 2,216 million (1,881) Purchases of properties SEK 12,093 million (9,678) Sales of properties SEK 5,755 million (1,084), 23 per cent (14) higher than fair value at the beginning of the year

Summary 2015 2014 2015 2014 Oct-Dec Oct-Dec Jan-Dec Jan-Dec Rental income, SEK million Operating surplus, SEK million Operating profit, SEK million Profit before tax, SEK million Earnings per share before and after dilution, SEK Rent level increase for comparable properties, per cent Real vacancy rate residential, per cent Loan-to-value, per cent Property fair value, SEK million Number of apartments

1,145 494 4,500 4,429 1.12 1.0 1.3 48 72,764 51,231

983 424 626 -40 -0.11 1.2 1.0 52 57,736 47,896

4,339 2,175 9,977 9,206 2.33 3.8 1.3 48 72,764 51,231

3,602 1,882 3,226 852 0.15 4.3 1.0 52 57,736 47,896

Akelius Residential Property AB (publ)

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Year end report, January to December 2015

Currency war boosts real estate prices The current currency war, with new printed money and interest rates used as weapons, has given a boost to real estate prices. We report a change in property value of SEK eight billion, of which SEK five billion is attributable to the current currency war, SEK one billion to property sales and SEK two billion to an increased operating surplus. Some markets are hot today, maybe even overheated. We will likely buy fewer properties in 2016 than we did in 2015. Our concentration in metropolitan areas has increased. At the end of the year, 72 per cent of our properties were in cities with a population of more than one million. This is an increase of 9 percentage points since the end of 2014. Apartments for metropolitans is our thing. During the year, we entered the United States with the purchase of properties in New York, Washington D.C. and Boston. We grew even further with additional purchases in London, Berlin, Hamburg, Toronto, Stockholm, Paris and Montreal. Property purchases totalled SEK twelve billion, of which SEK 5.5 billion were in the United States. Sales were carried out in Sweden, Germany, England and Canada. Our sales volumes reached nearly SEK six billion, 23 per cent above fair value at the beginning of the year.

Reception at West Square, Boston. 2

Akelius Residential Property AB (publ)

Among the sales, we sold a portfolio of 900 apartments in Germany - 43 per cent above fair value - and Hamlet Gardens in London with 121 apartments - 18 per cent above fair value. In the capital market, we issued both preferred shares for SEK two billion and bonds for SEK five billion. We started to issue certificates, the outstanding volume is SEK two billion. Standard & Poor’s gave us a credit rating of BBB-. Loan-to-value has fallen from 52 to 48 per cent. For secured loans, loan-to-value went down from 47 to 36 per cent. The equity to assets ratio has risen by three percentage points to 41 per cent. Liquidity is SEK eight billion, SEK four billion more than short-term loans. Investments in properties amounted to SEK 2.2 billion, 18 per cent more than in 2014. Almost half of the investments were related to upgrading of vacant apartments. We are working tirelessly to provide both current and future tenants with better living in the megacities of the Western world.

Pål Ahlsén CEO, Managing Director

Lobby at West Square, Boston.

Year end report, January to December 2015

Property portfolio 2015-12-31

Country Sweden Germany Canada United States England France Total

Residential units

Lettable space, thousand sqm Residential Commercial

Fair value

Total

SEK million

SEK/sqm

23,520 20,307

1,617 1,232

233 79

1,850 1,311

31,727 24,892

17,148 18,986

3,999 1,534 1,404 467 51,231

226 111 67 14 3,267

1 1 5 2 320

227 112 72 16 3,587

4,859 5,451 4,840 995 72,764

21,424 48,769 67,660 62,640 20,284

Sweden 23,520

Canada 3,999

England 1,404

Germany 20,307

France 467 United States 1,534

Akelius Residential Property AB (publ)

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Year end report, January to December 2015

Sweden Total property portfolio Residential units Fair value, SEK million - SEK per sqm - required yield, per cent Vacancy rate, residential, per cent - due to upgrades, per cent - real vacancy rate, per cent

23,520 31,727 17,148 4.30 1.5 92 0.1

Average rent, SEK/sqm/year Total portfolio 2015-01-01 Sales Comparable portfolio 2015-01-01 Increase in comparable portfolio 2.6 % Comparable portfolio 2016-01-01 Purchases Total portfolio 2016-01-01

1,156 -1 1,155 30 1,185 -1 1,184

Haparanda 151 apartments*

Umeå 572 apartments* Östersund 968 apartments*

Stockholm 8,957 apartments Eskilstuna 604 apartments Lysekil 295 apartments Trollhättan 700 apartments Gothenburg 1,186 apartments

Skövde 821 apartments Borås 1,496 apartments

Halmstad 1,162 apartments Helsingborg 2,345 apartments Malmö 3,975 apartments

*) Sold per 2016-02-01.

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Akelius Residential Property AB (publ)

Lund 288 apartments

Year end report, January to December 2015

Germany Total property portfolio Residential units Fair value, SEK million - SEK per sqm - required yield, per cent Vacancy rate, residential, per cent - due to upgrades, per cent - real vacancy rate, per cent

20,307 24,892 18,986 4.35 5.0 60 2.0

Average rent, EUR/sqm/month Total portfolio 2015-01-01 Sales Comparable portfolio 2015-01-01 Increase in comparable portfolio 5.1% Comparable portfolio 2016-01-01 Purchases Total portfolio 2016-01-01

Kiel 406 apartments*

7.77 0.00 7.77 0.40 8.16 -0.03 8.13

Rostock 278 apartments

Hamburg 4,143 apartments Lüneburg 99 apartments* Berlin 12,274 apartments

Düsseldorf 740 apartments Cologne 587 apartments

Frankfurt 635 apartments Mainz 410 apartments

Munich 735 apartments

*) Sales agreement signed, hand-over date during the first quarter 2016.

Akelius Residential Property AB (publ)

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Year end report, January to December 2015

Canada Total property portfolio Residential units Fair value, SEK million - SEK per sqm - required yield, per cent Vacancy rate, residential, per cent - due to upgrades, per cent - real vacancy rate, per cent

Toronto 82% of market value

1.83 1.83 0.07 1.89 -0.10 1.79

Montreal 18% of market value

10 km

6

3,999 4,859 21,424 4.37 11.1 68 3.6

Average rent, CAD/sqft/month Total portfolio 2015-01-01 Sales Comparable portfolio 2015-01-01 Increase in comparable portfolio 3.6 % Comparable portfolio 2016-01-01 Purchases Total portfolio 2016-01-01

Akelius Residential Property AB (publ)

10 km

Year end report, January to December 2015

England Total property portfolio Residential units Fair value, SEK million - SEK per sqm - required yield, per cent Vacancy rate, residential, per cent - due to upgrades, per cent - real vacancy rate, per cent

1,404 4,840 67,660 4.22 8.0

Average rent, GBP/sqft/month Total portfolio 2015-01-01 Sales Comparable portfolio 2015-01-01 Increase in comparable portfolio 11.5 % Comparable portfolio 2016-01-01

65 Purchases 2.8 Total portfolio 2016-01-01

1.74 -0.08 1.66 0.19 1.85 0.22 2.07

London

20 km

Properties with red dots were sold in January 2016.

Akelius Residential Property AB (publ)

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Year end report, January to December 2015

France Total property portfolio Residential units Fair value, SEK million - SEK per sqm - required yield, per cent Vacancy rate, residential, per cent - due to upgrades, per cent - real vacancy rate, per cent

467 995 62,640 4.21 35.3 96

Average rent, EUR/sqm/month Total portfolio 2015-01-01 14.43 Sales Comparable portfolio 2015-01-01 14.43 Increase in comparable portfolio 47.3 % 6.82 Comparable portfolio 2016-01-01 21.24 Purchases 1.26

1.3 Total portfolio 2016-01-01

Paris

10 km

8

Akelius Residential Property AB (publ)

22.50

Year end report, January to December 2015

United States Total property portfolio Residential units Fair value, SEK million - SEK per sqm - required yield, per cent Vacancy rate, residential, per cent - due to upgrades, per cent - real vacancy rate, per cent

1,534 5,451 48,769 4.47 9.8 72 2.8

Average rent, USD/sqft/month Total portfolio 2015-01-01 Sales Comparable portfolio 2015-01-01 Increase in comparable portfolio Comparable portfolio 2016-01-01 Purchases Total portfolio 2016-01-01

2.26 2.26

Boston1

New York 62% of market value

10 km

10 km

Washington D.C.2

10 km

1) 29% of market value 2) 9% of market value

Akelius Residential Property AB (publ)

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Year end report, January to December 2015

Total property return January-December 2015 SEK million 57,736

Growth Jan-Dec

Revaluations

8,026

13.9 %

Investments

2,216

3.8 %

Purchases

12,093

20.9 %

Sales

-5,755

-

Translation difference

-1,551

-

72,764

26.0 %

2,175

3.8 %

SEK million

p.a.

10,201

17.7 %

Fair value, 2015-01-01

Fair value, 2015-12-31 Operating surplus

Total property return

Annual property return Per cent 18 16 14 12 10 8 6 4 2 0 2009 Jan–Dec

2010 Jan–Dec

Income return

10

2011 Jan–Dec Value growth

Akelius Residential Property AB (publ)

2012 Jan–Dec

2013 Jan–Dec

Average

2014 Jan–Dec

2015 Jan–Dec

Interim report January to December 2015

Result January-December 2015 Operating surplus SEK 2,175 million

Rental income for the year increased by SEK 737 million to SEK 4,339 million (3,602). Of the total increase in rental income, SEK 612 million is due to the purchase of new properties and SEK 125 million is due to increased rental income for comparable properties. Rental income for comparable properties, adjusted for changes in exchange rates, increased by 4.3 per cent compared to 2014. The real vacancy rate was 1.3 per cent, which is 0.3 percentage points higher than at the end of 2014. The vacancy rate was 4.3 per cent, of which 70 per cent was due to apartment upgrades and planned apartment sales. Property expenses amounted to SEK 2,164 million (1,720), of which SEK 408 million (314) relates to maintenance, equal to an average annual expense of SEK 116 per square meter. The operating surplus adjusted for currency differenses for comparable properties increased by 4.0 per cent. For the total portfolio, the operating surplus margin was 50.1 per cent (52.2).

Rental income, comparable properties SEK million 3,034 2,909

Jan-Dec 2014

Net financial items SEK -771 million

Interest expenses for the year were SEK 1,277 million (1,191). The average interest rate was 3.44 per cent, 0.50 percentage points lower than at the end of 2014. Derivative financial instruments increased in value by SEK 533 million (-1,149) during the year, mainly due to a shorter duration. Other financial items amounted to SEK -26 million (-32).

Net profit before tax SEK 9,206 million

Net profit before tax was SEK 9,206 million (852).

Jan-Dec 2015

Operating surplus, comparable properties SEK million 1,752

Increase in value of properties 13.9 per cent

The increase in value of the properties was SEK 8,026 million (1,412), equivalent to 13.9 per cent (3.2). The increase in value is mainly due to a lower required yield. For comparable properties the required yield has decreased by 0.36 percentage points.

4.3%

1,684

4.0%

Jan-Dec 2014

Jan-Dec 2015

Real vacancy rate Percentage

1.0

0.3

1.3

Tax expenses SEK -2,035 million

Tax expenses for the year amounted to SEK 2,035 million (350), of which SEK 2,001 million mainly relates to deferred tax from unrealized gains on properties. SEK 34 million is reported as current tax, mainly on sale of properties. Akelius Residential Property Group has no ongoing tax disputes.

1 Jan 2015

1 Jan 2016

Akelius Residential Property AB (publ)

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Year end report, January to December 2015

Property portfolio changes Property purchases SEK 12,093 million 45 per cent of purchases were made in the United States, 14 per cent in Germany, 14 per cent in England, 11 per cent in Canada, 9 per cent in Sweden and 7 per cent in France. The average required yield was 4.38 per cent.

Property investments SEK 2,216 million

Investments in properties totalled SEK 2,216 million (1,881), equivalent to an annual investment of SEK 628 per square meter. 42 per cent of investments refers to apartment upgrades.

Property sales SEK 5,755 million

We sold properties in Sweden for SEK 2,718 million, in Germany for SEK 1,559 million, in England for SEK 1,367 million and in Canada for SEK 111 million. Selling prices were 23 per cent higher than the fair value at the beginning of the year. In total 2,752 apartments, with a profit of SEK 800 million, including SEK 121 million in selling expenses. Well-kept residential properties are attractive investments for many types of investors, thus helping residential properties provide good liquidity. This year, we have sold properties to individuals, to small local businesses and large investors.

Property market value SEK 72,764 million

The market value was SEK 72,764 million (57,736), which is equivalent to an average of SEK 20,284 per square meter. The average required yield for the entire portfolio was 4.33 per cent, which is 0.39 percentage points lower than at the beginning of the period.

Required yield Opening, 2015-01-01 Purchases Sales Comparable Exchange rate differences Closing, 2015-12-31

Per cent 4.72 -0.02 -0.01 -0.36 0.00 4.33

Purchases SEK million New York

3,362

London

1,689

Boston

1,597

Berlin

1,392

Toronto

924

Stockholm

884

Paris

850

Washington

484

Montreal

359

Others

552

Purchases SEK 000s/ sqm

Required yield %

SEK 000s

5.5

90 80 70 60 50 40 30 20 10

5.0 4.5 4.0 3.5 Sw Ge Ca En Fr U rm na gla anc nite ed d en d nd e an St y a a

te s

Sales SEK million

5,755 4,682 23%

3,822 22%

Purchase Fair value price plus beginning investments of the year 12

Akelius Residential Property AB (publ)

Sale price

Year end report, January to December 2015

Financing Equity to assets ratio 41 per cent During the year, equity increased by SEK 8,084 million to SEK 30,667 million. The equity to assets ratio increased from 38 to 41 per cent.

Loan-to-value per cent 52

48 12%

Loan-to-value 48 per cent

Interest-bearing debt increased during the year by SEK 5,619 million to SEK 35,955 million. The loan-to-value ratio decreased from 52 to 48 per cent. Secured loans decreased by SEK 540 million to SEK 27,126 million. The secured loan-to-value decreased from 47 to 36 per cent. The ambition is for the loan-to-value for secured loans to be 25 percent at end of 2018. The secured loans have been borrowed from 35 banks in six countries. Unsecured loans encompass three listed bond loans, commercial papers and loans from related companies. These increased during the year by SEK 6,159 million to SEK 8,829 million. The nominal value of unsecured bonds and commercial papers has increased by SEK 5,846 million to SEK 7,196 million, fully in line with the ambition to increase our presence in the capital market. Pledged assets amounted to SEK 34,921 million and consist mostly of real estate mortgages.

36% 2015

2014 Loan-to-value secured

Loan-to-value unsecured

Average interest rate per cent 5.26 4.85

4.75

3.94

Capital tied up 5.7 years

Interest-bearing debt was tied up for an average of 5.7 years, compared to 4.5 at the end of 2014. The loans that mature within one year amount to SEK 3,847 million. The refinancing risk is mitigated by strong liquidity, highly diversified funding and a low loan-to-value.

3.44

Dec 2011

Dec 2012

Dec 2013

Dec 2014

Dec 2015

Interest rate hedge 4.3 years

SEK 11,883 million had a fixed interest rate term of more than five years and SEK 9,257 million had a fixed interest rate term of less than one year. The average interest rate of 3.44 per cent is 0.50 percentage points lower than at the end of 2014. The average interest rate hedge was 4.3 years, as compared to 4.2 years at the end of 2014.

Liquidity SEK 7,704 million

Available funds in the form of cash and unutilized credit facilities totalled SEK 7,704 million. The unborrowed share of the properties’ fair value corresponded to SEK 45,637 million.

Interest coverage ratio times 3.0 Realized value growth

1.9

EBITDA

Jan-Dec 2015

Pro forma 12 months

See page 21 for more information

Akelius Residential Property AB (publ)

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Year end report, January to December 2015

Other financial information Cash flow for the year

Fourth quarter

Cash flow before changes in working capital increased by 29 per cent to SEK 855 million (661). Operating activities generated a cash flow of SEK 974 million (702). Net cash from investing activities was SEK -8,182 million (-10,657). Cash flow required for acquisitions of properties is secured before signing acquisition agreements. Profitable and non-mandatory upgrades can, if needed, be stopped within a three-month period. Cash flow from financing activities was SEK 7,166 million (10,174).

Net income for the quarter amounted to SEK 3,374 million (-271) and has been impacted by change in the fair value of derivative financial instruments of SEK 275 million (-338) and of properties of SEK 4,093 million (231).

Preference shares In April 2015, Akelius carried out an issue of 6,060,606 new preference shares at a price of SEK 330 per preference share, which provided the company with SEK 2,000 million before transaction costs. The total number of preference shares at the end of the period amounted to 18,835,606, equivalent to SEK 6,020 milion reported in equity. Preference shares represent 0.65 per cent of the total number of shares in Akelius Residential Property AB. At 31 December 2015, the price paid per preference share was SEK 291.5. During 2015 Akelius paid dividends to the owners of preference shares of SEK 346 million. An additional dividend of SEK 5 per preference share was paid on February 5, 2016, for a total of SEK 94 million.

Akelius rating In June 2015, Standard & Poor’s Rating Services rated Akelius as BBB- with a stable outlook. Listed bonds are rated as BB+.

Parent company The parent company’s net financial income for the year amounted to SEK 127 million (-448), while profit before tax totalled SEK 1,127 million (-624), which is attributable to positive changes in the fair value of derivative financial instruments of SEK 291 million (-440) and dividends received for SEK 943 million. 14

Akelius Residential Property AB (publ)

During the fourth quarter, rental income increased to SEK 1,145 million (983) and property costs increased to SEK 650 million (559), which resulted in an improvement in the operating surplus to SEK 494 million (424). Net financial items totalled SEK -70 million (-667), including change in the fair value of derivatives. Cash flow for the fourth quarter amounted to SEK -163 million (157). Cash flow generated from operations was SEK 682 million (196). Net cash flow from investing activities amounted to SEK -1,624 million (-4,642), which is essentially explained by the acquisition of investment properties for SEK -3,239 million (-4,009) and the sale of properties for SEK 2,523 million (27). Financing activities had a positive effect on cash flow of SEK 779 million (4,603).

Assets held for sale Akelius has signed an agreement for the sale of real estate in Östersund, Umeå and Haparanda for SEK 1,878 million, a total of 1,693 apartments and 133 commercial premises. An agreement was signed to sell four properties with a total of 121 apartments and a value of SEK 207 million outside London, England. Agreements have also been signed in Germany for the sale of properties in Kiel with a value of SEK 431 million, in Rostock with a value of 219 million, and apartments in Hamburg with a value of SEK 65 million. Fair value measurement is based on the purchase price stated in the signed purchase agreement between buyers and sellers when agreements have been signed. The purchase price is considered to belong to Level 1 of the fair value hierarchy IFRS 13.

Year end report, January to December 2015

Other financial information When no signed agreement exists, the fair value is determined in the same way as for investment properties. As of December 31, 2015, the disposal group consisted of assets of SEK 2,802 million minus liabilities amounting to SEK 158 million, consisting of a deferred tax liability of SEK 122 million and other liabilities of SEK 36 million.

Basis of presentation Statement of compliance The Akelius Residential Property Group’s Interim report has been prepared in accordance with IAS 34, Interim Financial Reporting. The financial statements of the parent company Akelius Residential Property AB, corporate identity number 556156-0383, have been prepared in accordance with the Swedish Annual Accounts Act and the accounting standard RFR 2, Accounting for Legal Entities. The accounting policies adopted in the preparation of the interim report are consistent with those followed in the preparation of the Group’s annual financial statements for the year 2014. The figures in this interim report have been rounded up or down, while the calculations have been made without rounding up or down. As a result, the figures in certain tables and key figures may appear not to add up correctly.

Estimates and assessments Estimates and assessments are evaluated continuously based on empirical factors and other aspects, including anticipation of future events that are reasonable under the prevailing circumstances. The same principles are followed in the interim reporting as in the previous annual report. Derivative instruments Derivative instruments consist mainly of interest rate swaps. Estimates of the fair value of derivatives are based on Level 2 of the fair value hierarchy.

Compared to 2014, no transfers have occurred between the different levels of the hierarchy, and no significant changes have been made regarding the valuation method. Cash flow in the derivative contracts is compared to the cash flow that would have been received if the contracts have been concluded at market prices on the closing date. The difference in the cash flows is discounted using an interest rate that takes into account the credit risk. The present value obtained is reported in the balance sheet at fair value. Changes in fair value are recognized in the income statement without the application of hedge accounting.

Valuation of properties The fair value of all properties was assessed by internal valuations on the closing date. The valuations are based on a cash flow model for each individual property, with separate assessments of future earning ability and required rates of return. The cash flow model is based on actual income and expenses adjusted for a normalized future cash flow.

Risks and uncertainties The operational risks are limited through concentration of the property portfolio to residential properties in metropolitan areas. Strong residential rental markets in Sweden, Germany, Canada, England, France and the United States reduce the risk for long-term vacancies. In order to further reduce the risk, or variations in cash flow, interest rates are secured on a longterm basis. Access to capital from a large number of banks, through the capital market and from private individuals, mitigates the refinancing risk. Overseas investments are hedged to reduce the impact of currency movements on the Group´s equity to assets ratio. No material changes in the company’s assessment of risks have occurred since the publication of the 2014 annual report.

Akelius Residential Property AB (publ)

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Year end report, January to December 2015

Other financial information New accounting principles The following standards, amendments to standards and interpretations have been issued but are not yet effective for annual periods beginning on and after 1 January 2015. Those which may be relevant to the Group are set out below. The Group does not plan to early adopt these standards. IFRS 9 – Financial Instruments. IFRS 9 introduces new requirements for the classification and measurement of financial assets. Under IFRS 9, financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. IFRS 9 introduces additional changes relating to financial liabilities. The IASB currently has an active project to make limited amendments to the classification and measurement requirements of IFRS 9 and to add new requirements to address the impairment of financial assets and hedge accounting. IFRS 9 is effective for annual reporting periods beginning on or after 2018-01-01, with early adoption permitted. IFRS 15 – Revenue from Contracts with Customers. IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognized. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programs. IFRS 15 is effective for annual reporting periods beginning on or after 2018-01-01, with early adoption permitted. At this time, the impact of the above publications is not expected to be material to the Group.

Other

The Annual Report will be available on Akelius website on 2016-03-18. The Annual General Meeting will be held on 2016-04-15 in Stockholm. Announcement will be posted on the company’s website. As the Board has yet to decide on proposal for allocation of profit, this information will be presented in the notice convening the Annual General Meeting.

16

Akelius Residential Property AB (publ)

Personnel

At the end of the period, 558 (454) people were employed in the Group.

Related party transactions During the year, Akelius purchased architectural services from affiliates of the board member Igor Rogulj amounting to SEK 2 million. Akelius Residential Property AB sold the subsidiary Akelius Spar AB to the majority shareholder Akelius Apartments Ltd for SEK 116 million. Loans from related parties have decreased by SEK 1,239 million. In addition to these transactions, transactions occurred with companies in Akelius Foundation Group. The scope and focus of these operations has not changed significantly during the year. All transactions were executed on market terms.

Events after balance sheet date We have acquired properties with 258 apartments in Boston and 415 apartments in Montreal. We have sold properties in northern Sweden for SEK 1,878 million and 121 apartments in London for GBP 16.7 million.

Stockholm, Sweden, 2016-02-08, Akelius Residential Property AB (publ)

Pål Ahlsén, CEO, Managing Director

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

Year end report, January to December 2015

Consolidated statement of comprehensive income SEK million Rental income Operating expenses Maintenance Operating surplus Central administration Other income and expenses Net income from the disposal of investment properties* Net income from the revaluation of investment properties Operating profit

2014 2015 2014 2015 Jan-Dec Jan-Dec Oct-Dec Oct-Dec 3 months 3 months 12 months 12 months 1,145 -534 -117 494

983 -421 -138 424

4,339 -1,756 -408 2,175

3,602 -1,406 -314 1,882

-46 -1 543 3,510 4,500

-28 2 -2 231 626

-112 9 800 7,105 9,977

-54 5 100 1,293 3,226

Interest income Interest expenses Other financial income and expenses Change in fair value of derivative financial instruments Profit before tax

2 -356 8

2 -310 -19

4 -1,277 -31

7 -1,191 -39

275 4,429

- 338 -40

533 9,206

-1,149 852

Tax Profit for the period / year

-1,055 3,374

-232 -271

-2,035 7,171

-350 503

Items that will be reclassified to profit or loss: Translation difference Comprehensive income for the period / year

-457 2,917

538 267

-610 6,561

745 1,248

Profit attributable to: - owners of the parent company - no-controlling interests

3,338 36

-238 -32

7,055 116

503 -

Total comprehensive income attributable to: - owners of the parent company - no-controlling interests

2,926 -9

296 -28

6,443 118

1,245 3

1.12

-0.11

2.33

0.15

Earnings per share before and after dilution, SEK

*) SEK 121 million refer to transaction cost for 2015 and SEK 21 million for 2014.

Akelius Residential Property AB (publ)

17

Year end report, January to December 2015

Consolidated statement of financial position SEK million

2015 31 Dec

2014 31 Dec

Assets Intangible assets Investment property Tangible fixed assets Derivative financial instruments Deferred tax Financial fixed assets Total non-current assets

27 69,963 32 25 8 109 70,164

14 57,736 21 9 119 57,899

Trade and other receivables Derivative financial instruments Cash and cash equivalents Assets held for sale* Total current assets

808 12 238 2,802 3,860

612 278 890

Total assets

74,024

58,789

Equity and liabilities Total equity

30,667

22,583

32,108 1,983 4,175 49 38,315

26,519 2,466 2,384 33 31,402

3,847 2 1,035 158 5,042

3,816 53 935 4,804

Total equity and liabilities

74,024

58,789

Borrowings - unsecured - secured Total

8,829 27,126 35,955

2,670 27,666 30,336

Interest-bearing liabilities Derivative financial instruments Deferred tax Other liabilities Total non-current liabilities Interest-bearing liabilities Derivative financial instruments Trade and other payables Liabilities held for sale Total current liabilities

*) SEK 2,801 million was attributable to investment properties including SEK 1,878 million for the sale of apartments in Norrland, Sweden. 18

Akelius Residential Property AB (publ)

Year end report, January to December 2015

Consolidated statement of cash flows SEK million Operating surplus Central administration Other income and expenses

2014 2015 2014 2015 Jan-Dec Jan-Dec Oct-Dec Oct-Dec 3 months 3 months 12 months 12 months

Reversal of depreciation and impairment losses Interest paid Income tax paid Cash flow before changes in working capital

494 -53 -1 10 -271 2 181

425 -28 -17 24 -364 -1 39

2,175 -112 10 -1,213 -5 855

1,882 -54 -14 24 -1,173 -4 661

Change in current assets Change in current liabilities Cash flow from operating activities

181 320 682

-134 291 196

76 43 974

-143 184 702

Investments in intangible fixed assets Investment in properties Acquisition of investment properties Acquisition of net assets Proceeds from sales of investment properties Proceeds from sale of net assets Purchase and sale of other fixed assets Cash flow from investing activities

-8 -752 -3,239 -43 2,523 -105 -1,624

-11 -630 -4,009 27 -19 -4,642

-17 -2,216 -12,093 792 5,755 -10 -393 -8,182

-14 -1,881 -9,678 1,064 -148 -10,657

New share issue Shareholder contribution Loans raised Repayment of loans Purchase and sale of derivative instruments Dividend

-1 2,987 -1,967 -47 -193

2,975 5,047 -264 -36 -3,119

1,974 22 19,026 -13,385 -26 -445

8,960 1,377 10,087 -6,043 -71 -4,136

779

4,603

7,166

10,174

-163

157

-42

219

401 -

121 -

278 2

59 -

238

278

238

278

Cash flow from investing activities Cash flow for the period / year Cash and cash equivalents at beginning of year Translation difference in cash and cash equivalents Cash and cash equivalents at end of year

Akelius Residential Property AB (publ)

19

Year end report, January to December 2015

Consolidated statement of changes in equity

Attributable to owners of the parent company SEK million Balance at 2014-01-01

Currency Share Share translation Retained reserve earnings capital premium

Total

Noncontrolling interests

Total equity

1,263

1,937

42

11,896

15,138

31

15,169

Acquired minority

-

-

-

-

-

41

41

Redistribution

-

-

-

-7

-7

7

-

Hybrid loan

-

-

-

-

-

1,365

1,365

Dividend

-

-1,937

-

-2,211

-4,148

-52

-4,200

475

8,548

-

-63

8,960

-

8,960

Profit for the year

-

-

-

503

503

-

503

Other comprehensive income

-

-

741

-

741

4

745

1,737

8,548

782

10,120

21,187

1,396

22,583

Acquired minority

-

-

-

-

-

22

22

Redistribution

-

-

-

-52

-52

52

-

Dividend

-

-

-

-377

-377

-98

-475

Share issue

4

1,971

-

-

1,975

-1

1,974

Group contribution

-

-

-

3

3

-

3

Tax on group contribution

-

-

-

-1

-1

-

-1

Profit for the year

-

-

-

7,055

7,055

116

7,171

Other comprehensive income

-

-

-612

-

-612

2

-610

1,741

10,519

170

16,748

29,178

1,489

30,667

Share issue

Balance at 2014-12-31

Balance at 2015-12-31

20

Akelius Residential Property AB (publ)

Year end report, January to December 2015

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

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

The pro forma 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 administration expenses. The interest expenses ibased on net debt on the balance date calculated according to the average rate. No tax has been calculated as it relates largely to deferred tax, which does not affect cash flow. The pro forma is not a forecast for the coming twelve months as it contains no estimate of rental, vacancy, currency exchange, future property purchases and sales or interest rate changes.

SEK million

Pro forma, 12 months revenue and cost at balance sheet date Jan-Dec 2015

Rental income Operating expenses Maintenance

4,339 -1,756 -408

4,635 -1,784 -346

Operating surplus Central administration excluding depreciation EBITDA Net interest expense Other financial income and expenses Profit before tax and revaluation Realized value growth

2,175 -102 2,073 -1,273 -30 770 1,812

2,505 -102 2,402 -1,255 -30 1,117 -

3.0

1.9

1.6

1.9

35,718 17.2

35,718 14.9

9.2

14.9

Interest coverage ratio Interest coverage ratio excluding realized value growth Net debt as per 2015-12-31 Net debt/EBITDA Net debt/EBITDA including realized value growth

Akelius Residential Property AB (publ)

21

Year end report, January to December 2015

Interest-bearing liabilities Duration Years 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 > 10 Total

Interest rate hedge Amount in SEK million

Interest rate hedge Average interest rate, per cent

Share, per cent

Capital tied up Amount in SEK million

Share, per cent

9,257 2,559 2,631 3,388 6,237 3,790 2,549 145 1,183 2,257 1,960 35,955

1.64 3.58 3.77 5.00 3.72 5.19 3.81 3.08 4.11 2.56 4.46 3.44

26 7 7 9 17 11 7 3 6 5 100

3,847 5,104 4,565 3,348 7,640 2,436 883 355 68 1,785 5,926 35,955

10 14 13 9 21 7 2 1 5 17 100

Segment information January-December 2015, SEK million Rental income Operating expenses Maintenance Operating surplus Revaluation of investment properties Total property return Total property return, per cent Property fair value January-December 2014, SEK million Rental income Operating expenses Maintenance Operating surplus Revaluation of investment properties Total property return Total property return, per cent Property fair value 22

Akelius Residential Property AB (publ)

Sweden

Germany

Other

Total

2,216 -843 -262 1,111 2,947 4,058 13.7

1,531 -600 -84 847 3,732 4,579 21.6

591 -312 -62 217 1,346 1,563 22.4

4,339 -1,756 -408 2,175 8,026 10,201 17.7

31,727

24,892

16,145

72,764

Sweden

Germany

Other

Total

2,101 -842 -196 1,063 838 1,901 7.1 29,571

1,249 -438 -101 710 391 1,101 7.1 21,171

251 -126 -16 109 183 292 16.6 6,694

3,602 -1,406 -314 1,882 1,412 3,294 7.5 57,736

Year end report, January to December 2015

Statement of comprehensive income for the parent company SEK million

2015 2014 2015 Jan-Dec Oct-Dec Oct-Dec 3 months 3 months 12 months

Rental income Operating costs Maintenance

-

Operating surplus Depreciation, write down and reversals of fixed assets Gross profit Administration expenses Other income

-

-

14 -

-13 6 -7

Change in fair value of derivatives

14 433 228 -313 186

Profit before appropriations Appropriations Profit before tax Tax Profit of the period / year

Profits from sales of properties Operating profit Profit from shares in subsidiaries Finance income Finance expences

Comprehensive income

2014 Jan-Dec 12 months -

-38 -

-55 16

333 -126 -159

-38 943 868 -1,032 291

1,093 -1,101 -440

548 95

41 -138

1,032 95

-486 -138

643 -20 623 623

-97 74 -23 -23

1,127 -45 1,082 1,082

-624 137 -487 -487

-38

Akelius Residential Property AB (publ)

23

Year end report, January to December 2015

Statement of financial position for the parent company 2015 31 Dec

2014 31 Dec

1 1

5 5

Shares in subsidiaries Receivables from group companies Deferred income tax assets Total financial fixed assets Total non-current assets

13,164 9,231 331 22,726 22,727

13,270 1,055 377 14,702 14,707

Receivables from group companies Derivative financial instruments Other current receivables Prepaid expenses and accrued income Cash and cash equivalents Total current assets Total assets

20,182 12 1 192 74 20,461 43,188

7,911 7 58 155 8,131 22,838

Total equity

14,114

11,410

Interest-bearing liabilities Interest-bearing liabilities, group companies Derivative financial instruments Total non-current liabilities

9,112 17,379 474 26,965

3,108 2,510 671 6,289

Interest-bearing liabilities Interest-bearing liabilities, group companies Accounts payable Other current liabilities Accrued expenses and prepaid income Total current liabilities Total equity and liabilities

1,855 74 2 105 73 2,109 43,188

918 3,984 2 139 96 5,139 22,838

SEK million Assets Intangible assets Total intangible fixed assets

Equity and liabilities

24

Akelius Residential Property AB (publ)

Year end report, January to December 2015

Key figures 2015 31 Dec

2014 31 Dec

2013 31 Dec

2012 31 Dec

2011 31 Dec

30,667 41 50 29

22,583 38 42 9

15,169 33 39 24

9,970 27 32 27

8,567 26 31 4

36 48

47 52

49 56

53 59

50 60

3.0

1.7

1.5

1.3

1.5

1.6 5.7

1.5 4.5

1.2 4.6

1.2 5.0

1.3 5.7

3.44 4.3

3.94 4.2

4.75 5.0

4.85 5.4

5.26 5.6

Properties Number of apartments Rentable area, thousand sqm Growth in rental income1, per cent Growth in operating surplus1, per cent Real vacancy rate residential, per cent Vacancy rate residential, per cent

51,231 3,587 4.3 4.0 1.3 4.3

47,896 3,472 3.4 7.1 1.0 3.2

41,319 2,992 5.8 6.7 0.7 2.6

35,443 2,576 4.4 4.1 0.7 2.0

35,151 2,632 3.8 8.3 0.7 1.9

Fair value of properties, SEK million Opening balance Change in fair value Investments Purchases Sales Reclassification Exchange differences Closing balance

57,736 8,026 2,216 12,093 -5,755 -1,551 72,764

44,104 1,412 1,881 9,678 -1,084 1 745 57,736

35,437 1,569 1,531 6,901 -1,801 13 454 44,104

32,352 2,671 1,493 1,663 -2,383 -359 35,437

28,269 1,025 1,138 3,792 -1,828 -44 32,352

Fair value, per sqm Required yield, per cent Change in required yield1, per cent

20,284 4.33 -0.36

16,629 4.72 0.01

14,736 4.75 -0.01

13,755 4.73 -0.28

12,292 5.07 0.01

Equity Equity, SEK million Equity to assets ratio, per cent Net asset value to assets ratio, per cent Return on equity, per cent Interest-bearing liabilities Loan-to-value, secured loans, per cent Loan-to-value, per cent Interest coverage ratio including realized value growth Interest coverage ratio excluding realized value growth Capital tied up, year Fixed interest rates Average interest rate, per cent Fixed interest term, year

Akelius Residential Property AB (publ)

25

Year end report, January to December 2015

Key figures 2015 31 Dec

2014 31 Dec

2013 31 Dec

2012 31 Dec

2011 31 Dec

Properties Sweden Average residential rent, SEK /sqm/year Growth in average residential rent2, per cent Growth in rental income3, per cent Growth in operating surplus3, per cent Fair value, SEK million Fair value, SEK per sqm Required yield, per cent Number of apartments

1,184 2.6 3.0 1.8 31,727 17,148 4.30 23,520

1,156 3.7 3.5 8.0 29,571 14,899 4.78 24,407

1,114 5.8 5.5 3.3 26,797 14,115 4.84 23,867

1,074 5.0 3.8 5.2 23,456 13,809 4.79 21,707

1,026 5.1 22,574 12,055 5.15 23,354

Properties Germany Average residential rent, EUR /sqm/month Growth in average residential rent2, per cent Growth in rental income3, per cent Growth in operating surplus3, per cent Fair value, SEK million Fair value, SEK per sqm Required yield, per cent Number of apartments

8.13 5.1 6.0 3.9 24,892 18,986 4.35 20,307

7.77 5.4 3.1 5.8 21,171 16,752 4.72 19,423

7.71 5.6 6.8 13.7 15,549 15,398 4.64 15,769

7.52 5.6 6.8 1.0 11,981 13,649 4.64 13,736

7.19 7.0 9,778 12,903 4.87 11,797

Properties Canada4 Average residential rent, CAD /sqft/month Growth in average residential rent2, per cent Growth in rental income3, per cent Growth in operating surplus3, per cent Fair value, SEK million Fair value, SEK per sqm Required yield, per cent Number of apartments

1.79 3.6 4.1 25.1 4,859 21,424 4.37 3,999

1.83 6.6 7.0 -17.8 3,432 21,808 4.55 2,823

1.94 7.7 20.6 56.4 1,758 20,710 4.47 1,683

2.01 11.2 1,074 22,026 4.52 1,046

1.34 26 19,833 4.25 17

Properties England5 Average residential rent, GBP /sqft/month Growth in average residential rent2, per cent Growth in rental income3, per cent Growth in operating surplus3, per cent Fair value, SEK million Fair value, SEK per sqm Required yield, per cent Number of apartments

2.07 11.5 15.1 23.0 4,840 67,660 4.22 1,404

1.74 11.3 5.9 9.3 3,395 53,606 4.36 1,153

1.55 0.1 29.0 31.7 1,792 36,430 4.64 870

1.54 13.7 1,580 32,730 4.53 870

1.04 145 22,872 4.77 97

26

Akelius Residential Property AB (publ)

Year end report, January to December 2015

Key figures 2015 31 Dec

2014 31 Dec

2013 31 Dec

2012 31 Dec

2011 31 Dec

Properties France Average residential rent, EUR /sqm/month Growth in average residential rent2, per cent Growth in rental income3, per cent Growth in operating surplus3, per cent Fair value, SEK million Fair value, SEK per sqm Required yield, per cent Number of apartments

22.50 47.3 995 62,640 4.21 467

21.31 166 60,732 4.11 90

-

-

-

Properties United States Average residential rent, USD /sqft/month Growth in average residential rent2, per cent Growth in rental income3, per cent Growth in operating surplus3, per cent Fair value, SEK million Fair value, SEK per sqm Required yield, per cent Number of apartments

2.26 5,451 48,769 4.47 1,534

-

-

-

-

1) For comparable properties. The property portfolio in England was bought from fellow subsidiaries in March 2014. The table for 31 December 2015 shows the development as if the properties had been owned since 1 January 2014. 2) Growth from period start to period end for comparable portfolio. 3) Growth for the period compared to the previous year´s period for comparable portfolio. 4) The property portfolio in Toronto, Canada, was bought from a fellow subsidiary at the end of 2013. The tables above show the development as if the properties had been owned since 2011. 5) The property portfolio in England was bought from fellow subsidiaries in March 2014. The tables above show the development as if the properties had been owned since 2011.

Akelius Residential Property AB (publ)

27

Year end report, January to December 2015

Definitions Equity to assets ratio

Equity in relation to total assets.

Interest coverage ratio

Operating surplus plus central administration expenses, realized value growth, other financial income and expenses with add back of depreciation and impairment charges in relation to net interest.

Loan-to-value

Net assets divided by net debts.

Net assets

Total assets minus cash, pledged cash and liquid assets.

Net asset value

Equity, deferred tax and derivatives.

Net asset value to assets ratio

Net asset value in relation to net assets.

Net debts

Interest bearing debts minus cash, pledged cash and liquid assets.

Operating surplus margin

Operating surplus in relation to rental income.

Property portfolio

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

Realized value growth

Proceeds from the sale of investment properties minus acquisition costs, accumulated investments and cost of 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.

Return on equity

Comprehensive income divided by opening equity.

Vacancy rate

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

28

Akelius Residential Property AB (publ)

Year end report, January to December 2015

Akelius in brief Head office

Apartments for metropolitans

Svärdvägen 3A Box 104,  S-182 12  Danderyd Tel +46 (0) 8 566 130 00

80 per cent of the portfolio is situated in Berlin, Hamburg, London, Toronto, Montreal, New York, Boston, Stockholm, Gothenburg and Malmö.

Sweden Rosenlundsgatan 50 Box 38149 100 64 Stockholm Tel +46 (0)10-722 31 00 akelius.se

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

Canada 289 Niagara Street Toronto  M6J 0C3 Tel +1 (416) 214-2626 akelius.ca

England Coin House 2 Gees Court London W1U 1JA Tel +44 (0) 2 078 719 695 akelius.co.uk

Frankrike 67 Boulevard Haussmann 75008 Paris Tel +33 1 40 06 85 00 akelius.fr

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

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

Strong capital structure, low refinancing risk Akelius has agreements with thirty-five banks, listed preference shares and listed senior unsecured bonds. Akelius is Sweden’s largest listed property company. We have sixteen thousand shareholders.

First-class personnel More than one hundred and forty employees have graduated in Residential Real Estate Management from Akelius University.

Financial calendar Annual report 2015 Interim report Jan-Mar 2016 Interim report Jan-June 2016 Interim report Jan-Sep 2016

2016-03-18 2016-04-26 2016-08-08 2016-10-24

United States 101 Federal Street Suite 1900 Boston, MA 02110 +1 917 972 0404 akelius.us Akelius Residential Property AB (publ)

29