SBB’s third-quarter report showed a decrease in rental income to 805 million SEK, a 32.6% decline compared to the previous year. Similarly, net operating income decreased to 589 million SEK, a 36.5% drop from the previous year. However, looking at the performance over the last nine months, both rental income and net operating income in comparable properties have increased by 5.9% and 7.4%, respectively.
When contacted on the day of the report, CEO Leiv Synnes highlighted the positive trend in these key metrics as a takeaway from the report. He also mentioned the successful completion of two transactions involving the sale of developed properties and projects, which provided liquidity and favorable results for SBB.
Despite the continued negative pre-tax results, with a loss of 1.9 billion SEK for the latest quarter and 6.7 billion SEK year-to-date, Synnes remains optimistic about a turnaround. He believes that the real estate market’s cyclical nature could lead to a positive price trend next year, potentially resulting in a profit for SBB and other industry players.
The company’s leverage ratio has also increased to 62%, 10% higher than a year ago. Synnes emphasized the need to maintain a sound financial position, especially as the market sentiment shifts. He expressed hope for an increase in property prices next year, which could positively impact the balance sheet.
Furthermore, SBB recorded a goodwill impairment of over 1 billion SEK in the latest report, attributed to property divestments related to the acquisition of Hemfosa. Synnes explained that selling underlying properties reduces the basis for justifying goodwill, leading to impairment charges.
To address its financial challenges, SBB has implemented various strategies, including selling properties in smaller lots and establishing interest companies with ownership stakes below 50%. These measures aim to enhance financing opportunities for both the individual interest companies and SBB. However, raising capital directly through SBB has been challenging due to ongoing legal disputes with hedge fund firm Fir Tree.
Regarding the upcoming court case in January, Synnes remains confident in SBB’s position but acknowledges the impact on fundraising efforts. The verdict is expected in March 2025, with potential implications for the company’s financial stability.
One of SBB’s significant events this year was the listing and share distribution of Sveafastigheter, a real estate company. Despite a lackluster stock performance post-IPO, Synnes expressed satisfaction with the listing process, emphasizing the liquidity infusion for future obligations. He also hinted at a desire for better pricing but acknowledged the necessity of the timing to secure immediate liquidity.
In summary, SBB faces financial challenges amidst market uncertainties but remains resilient in its approach to navigate these hurdles and capitalize on emerging opportunities. The company’s strategic initiatives and leadership vision position it for potential growth and value creation in the evolving real estate landscape.