European real estate thunderstorm? Swedish commercial real estate giant SBB downgraded to junk status

Irving Karonen
4 min readMay 16, 2023


Samhallsbyggnadsbolaget i Norden AB (SBB), one of Sweden’s largest commercial real estate companies, plunged more than 20% during the European stock market session, falling to its lowest level since 2018, having fallen in 14 of the last 15 trading days. There was a small rebound after today’s opening.

SBB’s market capitalization has fallen to less than $1.5 billion from more than $17 billion at the end of 2021, in a historic collapse for its more than 260,000 shareholders.

SBB Announces Suspension of Dividend and Cancellation of Stock Issuance

SBB’s Board of Directors held an emergency meeting. In a statement released at 11 p.m., SBB said market reaction since then has prevented it from proceeding with a placement issue of common shares (D shares) on expected terms, noting that the company is seeking to postpone the dividend payment date to next year’s general meeting. sBB also said it will not issue new Class D shares worth 2.6 billion Swedish kronor ($260 million).

S&P Global Ratings has downgraded SBB’s credit rating to junk status. S&P warned that SBB’s rating could be further downgraded if it “does not have access to sufficient sources of funding in the coming quarters to sustainably support its short-term financial position.

S&P said it no longer believes SBB can meet the threshold for an investment grade rating. The rating downgrade triggers bonds with increasing annual coupons in the company’s existing debt, which increases the company’s costs. This means that the company’s financing costs will increase by 285 million kroner.

The U.S. commercial real estate market has been hit hard by factors such as rising market interest rates so far this year.

Similar to U.S. real estate companies, SBB must roll over $40.8 billion of maturing bonds over the next five years, a quarter of which will mature in 2023. They are considered the “canary in the coal mine” of the European real estate industry, as most of this debt is short-term, floating-rate debt that is particularly vulnerable to interest rate movements.

Analysts at Arctic Securities AS are pleased with SBB’s plans to improve its liquidity position. In an interview with Bloomberg, real estate analyst Michael Johansson said:

The two decisions to suspend the dividend and cancel the D share issuance plan are generally favorable to SBB shareholders.

The problem for SBB is that the dividend payout was voted at the annual general meeting, so their only option is to suspend it.

Market confidence in SBB sinks

These developments pose serious problems for SBB. SBB is struggling to cope with a debt burden of $8.1 billion amid sharply rising interest rates and ballooning credit spreads. This also reflects the problems facing the broader commercial real estate sector in Sweden.

SBB’s CEO, Ilija Batljan, has repeatedly assured investors that he will act to preserve the company’s credit profile. the majority of SBB’s rental income comes from regulated residential properties in the Nordic region.

Less optimistic than Johansson, Molly Guggenheimer, equity strategist at Danske Bank in Denmark, said, “This will be another downside for the sector, even if SBB’s situation is not directly related to its Swedish peers.” He added that the cancellation of the stock offering illustrates SBB’s current lack of access to capital markets, increasing refinancing risk.

Carnegie downgraded SBB’s rating to “sell” from “hold. Fredric Cyon, an analyst at the agency, said downside risks remain high and companies need to take action to improve their balance sheets: “Further asset sales are an option, but we doubt this will be enough to restore investor confidence.” He lowered his target price for SBB shares from SEK 13 to SEK 7.

The real estate crisis continues to spread

SBB’s plunge hit European real estate stocks hard on the same day, with the sector down 3.2%, led by Swedish companies: Sagax fell 7.8%, Balder fell 7.6%, Wallenstam fell 5.9%; other European real estate stocks such as Kojamo fell 5.3%, Aroundtown fell 5.1%, Safestore fell 5 per cent. These hard-hit stocks had a small rebound after Wednesday’s opening bell.
This comes after the U.S. commercial real estate market also took a major hit. More and more Wall Street analysts are beginning to suggest that commercial real estate will become a “time bomb” for the U.S. economy, which concerns not only large and small banks, but also the broader U.S. economy, and once the commercial real estate thunderstorm, followed by the likely Fed’s QE again.

In fact, the problems in the Swedish housing market are not only disturbed by the crisis abroad either.

Swedish house prices rose rapidly in 2021 and early 2022, but housing costs have been on a steady downward trajectory since July 2022. Swedish house prices have actually fallen 15% from their 2022 peak, making it one of the worst real estate markets in the world and exacerbating the broader challenges facing the real estate sector. With banks tightening lending and the bond market virtually closed to lower-rated issuers, there are few financing options available.

Nordic United Bank expects Sweden to start construction of 22,500 homes this year, less than half of last year’s starts and down 67 per cent from 2021. According to the Nordic United Bank, this is a major factor in Sweden’s projected 1.2 per cent contraction in economic output in 2023, as the direct impact of the decline in residential construction is close to 1 percentage point.



Irving Karonen

Web3 enthusiast, Entrepreneur, Scientist, and Financial Engineer. Sharing Frontlines of Innovation and Investments. Biz: