Akelius Residential Property AB

S&P Global Ratings' stable outlook on Swedish residential real estate company Akelius reflects our expectation of continued favorable demand for midsize residential apartments in most of Akelius' markets, where new supply remains limited. We also anticipate that Akelius will keep its leverage stable at current levels, with our adjusted ratio of debt to debt plus equity at 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 increased, 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 declined back to 1.5x or below. This could result from further material disposals or

...S&P Global Ratings assumes a global recession with GDP growth for the Eurozone at -2% for 2020 according to our latest forecasts, due to the economic impact of COVID-19. The residential sector should remain more resilient to the impact compared to retail or even office real estate and we currently forecast no material damage to Akelius' cash flow base. In light of the current global spread of the Coronavirus, S&P Global Ratings has revised its GDP growth forecast globally and now expects the Eurozone to shrink to about -2% in 2020, from 1.2% in 2019. The pandemic has strongly impacted countries like the U.S., Germany, or France, where about half of Akelius' portfolio is located, causing the closure of shopping malls, retail stores, bars, and restaurants. While we believe that residential landlords are not directly impacted by COVID-19, we could see an increase in the rent loss rate or tenants not being able to pay their rents for several months, depending on how long the pandemic lasts...

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