Embattled Swedish landlord SBB explores options including sale

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

The board of Samhällsbyggnadsbolaget i Norden (SBB) said on Monday that its strategic review of the company had been expanded to include a sale of the whole group or parts of it but would not include a share issue.

The embattled Swedish landlord is fighting against a cocktail of higher interest rates, falling property prices and tighter bank lending. Fitch became the second credit rating agency after S&P to cut SBB to junk status over fears about how much short-term debt it needs to refinance in the coming year.

Shares in SBB rose by 8 per cent on Monday morning but are still down by more than 90 per cent from their peak at the end of 2021.

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 increased their bets against Sweden’s property industry with SBB the most shorted stock in the country. The landlord has taken increasingly big moves to try to stem its problems by stopping paying a dividend, selling its stake in a construction company and halting a planned rights issue.

“The board of directors views the intrinsic equity value of the business as significantly higher than SBB’s current market value,” SBB said. “Therefore, the board of directors has decided that it is in the best interest of the shareholders to broaden its review of strategic options to determine which of the available alternatives maximise shareholder value, while at the same time safeguarding continued best-in-class service to the company’s tenants.”

It has hired JPMorgan and Swedish lender SEB to act as advisers.

Property groups took advantage of low interest rates and rising prices for years to load up on debt but those in Sweden stand out for their use of short-term borrowings. Many of those landlords now have to refinance that debt as interest rates soar.

Sweden’s central bank has raised its main rate from zero to 3.5 per cent since last May and economists expect it to increase again soon.

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

It has a $8bn debt pile and said at its first-quarter results that 15 per cent of that would need refinancing in the next year with another 22 per cent falling due in the following year.