Sweden's Commercial Real Estate Market needs New Investment Capital

Sweden's commercial property rental company, Samhallsbyggnadsbolaget i Norden AB (SBB), has stopped its dividends payment after receiving a negative credit rating from S&P Global.

Sweden's commercial property rental company, Samhallsbyggnadsbolaget i Norden AB (SBB), has stopped its dividends payment after receiving a negative credit rating from S&P Global. The company is seeking to delay the payment of dividends until before the 2024 annual general meeting. This has brought to light a much bigger crisis in Sweden's commercial real estate market, with more than $40.8 billion in bond debt due within the next five years, and around a quarter of that will mature by 2023.

Sweden's Commercial Real Estate Market need New Investment Capital

Most of the bond debt is short-term, with a floating interest rate, and this, in combination with a 15% drop in house prices, has compounded Swedens' refinancing crisis, making it one of the world's worst home price declines.

SBB is selling assets to enhance liquidity and has announced that there will be no new issue of Class D shares, worth 2.6 billion kronor ($260 million). In light of these events, shares of SBB fell as much as 9.5% after trading began on May 9, the lowest level in nearly five years.

The rating move and dividend pause have raised serious concerns about SBB's ability to manage its $8.1 billion in debt. It is also an indicator of the significant struggles experienced by other commercial real estate companies in Sweden. These companies need to find a solution to the refinancing crisis faced with the bond debt maturity within the next few years.

However, there may be a silver lining. This situation could prompt much-needed regulatory action, encouraging companies to reconsider their borrowing strategies and that more long-term investments are made in the Swedish housing market. It is essential to find a balance between addressing the refinancing crisis and stimulating growth in the housing sector. Hopefully, these actions will lead to a better and more resilient market.