Akelius Residential Property AB

S&P Global Ratings' stable outlook on Swedish residential real estate company Akelius Residential Property AB reflects our expectation of continued favorable demand for midsize residential apartments in most of Akelius' markets, where supply remains limited. We also anticipate that Akelius will improve its leverage, with our adjusted ratio of debt to debt plus equity improving to less than 50% and EBITDA interest coverage increasing marginally to 1.7x-1.9x over the next 12-24 months. We could lower the rating if Akelius' leverage increases, with debt to debt plus equity well above 55%, as a result of increasing operational costs or debt-funded acquisitions, or if EBITDA interest coverage remains at 1.5x or below. This could result from further material disposals or an increase

...Akelius' S&P Global Ratings-adjusted EBITDA interest coverage is weaker than we forecast for 2018, but we expect it will gradually improve in 2019. The company's S&P Global-Ratings adjusted EBITDA interest coverage ratio decreased marginally in 2018 to 1.5x from 1.7x in 2017, mainly due to higher operating and administrative expenses than anticipated. On the back of the company's deleveraging strategy, we believe the ratio will improve in the next three-to-four quarters to 1.7x-1.8x, and declining interest expenses will more than offset the negative impact on EBITDA following the company's net seller position for 2019. Social and political debates surrounding rent affordability in German metropolitan areas may increase regulations and reputation risk for German residential landlords, including Akelius.Significant rent and price increases in the past decade in Germany, particularly in metropolitan areas and despite regulated rents, has caused public outcry and led to political debates surrounding...

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