Swedish Real Estate Giant SBB Offloads Assets to Bolster Financial Position

Swedish Real Estate Giant SBB Offloads Assets to Bolster Financial Position

Asset Sale to Strengthen SBB’s Financial Position

Sweden-based real estate company SBB has announced the sale of the LHL Hospital at Gardermoen, alongside an associated development plot of which it owns 65%, for a total of 2.8 billion Norwegian kroner. The buyer of the properties is Stiftelsen Diakonissehuset Lovisenberg, a tenant of the properties.

Interestingly, the sale price was approximately 10% below the book values as of the second quarter, as reported in SBB’s press release. Observers have suggested that the book values of property companies are generally inflated, and that larger write-downs may be seen in the future, potentially resulting in breaches of loan terms and triggering requirements for forced sales or equity injections.

SBB anticipates that the sale will generate net proceeds of 955 million kroner, which the company plans to use to bolster its liquidity and overall financial position.

SBB’s Journey Amid Economic Volatility

Amid the economic volatility triggered by the pandemic and subsequent cuts in interest rates to zero, SBB grew rapidly, fueled by substantial debt uptake. At one point, the company was valued at 100 billion, but its current market value stands at a mere five billion. In June, the company’s founder, Ilija Batljan, stepped down as CEO and was replaced by Leiv Synnes from Akelius, who is now tasked with salvaging what remains of the company.

Additional Liquidity Boost and New Company Structure

On Sunday night, Synnes and SBB announced that the company had further strengthened its liquidity by around eight billion Swedish kronor. This was achieved by selling a small portion of Educo, a school and nursery property company that SBB co-owns with Canadian firm Brookfield. As part of the deal, Educo will repay part of a company-internal loan to SBB, providing SBB with an additional 7.8 billion kronor. The funds from this transaction will be used to manage short-term financial obligations.

SBB also unveiled a new structure where the company will be decentralized. This involves setting up wholly owned and partially owned business units, and dividing the group into the units “education”, “community”, and “residential”. According to SBB, this decentralized structure will improve access to bank financing, enable equity raising, and enhance financial reporting and transparency. CEO Synnes also revealed plans to find strategic partners for the housing segment or potentially list the housing assets on the stock exchange.

Looking Ahead

These recent moves by SBB highlight the company’s efforts to navigate the current economic landscape and strengthen its financial position. While the sale of properties may initially seem like a loss, they could potentially provide the company with the financial flexibility it needs to weather the ongoing economic storm. Moreover, the new decentralized structure could enhance its operational efficiency and transparency, thereby attracting more investors and partners. However, only time will tell how these strategic moves will play out in the long run.