SBB flags improving debt market for Swedish real estate

By Greta Rosen Fondahn

(Reuters) -Swedish real estate group SBB flagged an improving debt market outlook as it reported reduced third-quarter losses on Wednesday and its continuing efforts to cut debt and restructure its business, sending its shares up 5%.

The company was one of several European real estate groups forced to trim debt and restructure in the face of high interest rates and weak economies in recent years, with Sweden among the hardest hit.

SBB, which owns properties such as hospitals and care homes, reported a tenth consecutive quarterly loss, but the 1.92 billion Swedish crown ($175 million) loss was less than the 3.13 billion crowns posted a year earlier.

Carlsquare analyst Bertil Nilsson said it was “not a particularly strong” result for the quarter. However, Sweden has made several cuts to its key interest rate this year, fuelling hopes of a recovery in the debt-laden property sector.

SBB Chief Executive Leiv Synnes said he has noted a change in credit and equity markets for Sweden’s property sector and expects further improvement over the next year.

The wind has clearly shifted in the capital market for Swedish real estate companies,” he said in a statement. With some lag, better access to capital will lead to increased demand for properties.

Investors and bankers, however, have warned that global real estate sectors might not get the sustained uplift they hope for from falling rates.

SBB said on Wednesday that its main priority remains financial stability. It has taken measures over the past year to repair its finances, such as buying back debt at discount and spinning off subsidiaries.

Synnes told Reuters the company still needs to reduce its leverage before it can issue new bonds and raise money in the capital market on favourable terms.

An improved debt market could lead to rising property prices in the coming year, helping SBB to make a profit, he added.

The landlord racked up debt buying properties across Sweden when borrowing costs were low. Its shares have lost more than 90% of their value since peaking in 2021.

($1 = 10.9822 Swedish crowns)

(Reporting by Greta Rosen FondahnEditing by Terje Solsvik, Alexandra Hudson and David Goodman)