Troubled Swedish landlord SBB considering sale

Swedish property company SBB is considering options including an outright sale as the group at the center of the Scandinavian country’s debt-fuelled real estate battle for survival.

The board of the Samahlsbeignadsbolaget i Norden (SBB) Said on Monday that the company’s strategic review was expanded to include the sale of the entire group or parts of it, but would not include the share issue.

The troubled Swedish landlord is fighting against a cocktail of high interest rates, falling property prices and tight bank credit. Fitch became the second credit rating agency after S&P to cut SBB to junk status amid fears it will need to refinance how much short-term debt it needs to refinance in the coming year.

Shares in SBB rose 8 percent on Monday morning but are still down more than 90 percent from their late-2021 peak.

Sweden is set to be one of the worst performing economies in Europe this year as falling property prices and high debt levels hit consumer confidence as well as the real estate sector.

Hedge funds have raised their bets against Sweden’s property industry, with SBB having the fewest stocks in the country. The landlord has taken increasingly drastic steps to try to remedy his problems by ceasing dividend payments, selling his stake in a construction company and halting the issue of planning rights.

“The Board of Directors consider the intrinsic equity value of the business to be substantially higher than the current market value of SBB,” SBB said. “Therefore, the Board of Directors has decided that it is in the best interests of the shareholders to broaden its review of strategic options to determine which of the options available maximizes shareholder value, while at the same time providing the best-in -Class service continues to protect the company’s tenants.

It has hired JP Morgan and Swedish lender SEB to act as advisors.

Property groups have taken advantage of low interest rates and rising prices over the years to shore up debt, but in Sweden they stand out for their use of short-term borrowing. Many of those landlords now have to refinance that loan as interest rates go up.

Sweden’s central bank has raised its key rate from zero to 3.5 percent since last May and economists expect it to hike again soon.

SBB was founded in 2016 by Ilija Bataljan, a former Social Democrat politician who was born in Montenegro, and expanded rapidly by buying rent-controlled social housing in Sweden and other Nordic countries. Its portfolio of 2,000 properties was last valued at $12 billion at the end of the first quarter.

It has a debt pile of $8bn and its first quarter results said 15 per cent of it would need refinancing next year and another 22 per cent the following year.