Year-end Report 2022

Dear fellow shareholders and credit investors,

Let me start by affirming that our core opera- tions continue to deliver. In 2022, our profit from property management, excluding unrealized exchange rate fluctuations, increased by 38 percent, from SEK 3,168m to SEK 4,382m. Cash flow from operating activities before changes in working capital increased by 42 percent over the year, from SEK 2,459m to SEK 3,485m. These secure and strong cash flows (backed up by an average lease duration of slightly more than ten years) are delivered by a well-diversified portfolio of assets that generate shareholder value at all stages in the economic cycle:

  • SBB Educo AB is Europe’s largest portfolio of social infrastructure for public education. In November 2022, a 49-percent holding was sold for SEK 2bn plus a contingent purchase consideration of SEK 1.2bn to the Brookfield Super-core Infrastructure Fund (one of the world’s largest infrastructure funds). Our key debt ratios at the end of the year do not include agreed and committed payments to SBB of SEK 10.5 billion, of which the Brookfield deal is SEK 9.2 billion. These will be reported in the first quarter of 2023.
  • Largest listed owner and developer of social infrastructure for elderly care in the Nordics.
  • Largest owner of LSS properties in the Nordics (housing for people with special needs). Tenants are directly or indirectly Nordic
  • Owner of unique buildings, including one of the Nordic region’s most modern hospitals, with the highest environmental certification of any building in Oslo, and with a 25-year lease agreement, as well as Sara kulturhus, probably Europe’s most sustainable property, with a 49-year lease agreement with the Municipality of Skellefteå.
  • One of the largest portfolios of rent-regulated residentials in the In December 2022, a third of the portfolio was distributed to holders of Class A and B shares in SBB, and subsequ- ently listed as Neobo Fastigheter AB (publ).
  • Holding about 32.6 percent of shares, SBB is the largest shareholder in JM AB (publ), the leading developer of residentials and community service properties in the Nordics.

The year 2022 was a challenging one in every regard. How else should one summarize a year characterized by rising inflation, sharply rising interest rates and energy prices, a frozen bond market in Sweden and Europe, continuing consequences of an ongoing pandemic, as well as an unimaginable war in Europe, with the hor- rific Russian invasion of Ukraine. It is times like these that test us all in terms of both resilience and adaptability. Being responsive to change and adapting to changing conditions is SBB’s main strength. While it is therefore gratifying that we have been able to deliver, it remains evident that our work is not yet finished. We will not stop until we have strengthened our credit rating and regained the full confidence of the market. Accordingly, the Board of Directors has decided to prioritize the following points:

  • SBB’s Board of Directors has resolved to assess the conditions for IPO of the subsidiary Ahead of the listing, Sveafast- igheter will own residential properties and projects through directly owned companies, joint ventures and listed shares for a total of about SEK 15bn. Of this, the net asset value in SBB is equivalent to about SEK 8bn. SBB has recently perceived considerable interest from international investors in Sveafastigheter’s platform as a Stockholm focused residential company with strong commitment to issues of sustainability. The transaction would further streamline SBB’s operations, focusing them even more clearly on community service properties, while SBB would concentrate its partial shareholdings in a single company. SBB intends to divest around 70 percent of the shares in the company in connection with the listing. In the assessment of the Board of Directors, such focus and specialization will facilitate increased shareholder value. The Board of Directors also believes that using the proceeds to decrease the company’s debt, will further strengthen SBB’s financial position. SBB holds a highly favourable view of the Stockholm region, and considers remaining a long-term shareholder of Svea- fastigheter following its listing. Sveafastigheter combines substantial hidden assets in SBB and a possible listing could make these visible.
  • SBB is currently in discussions regarding the sale of properties for an additional SEK 6bn. Our successful efforts from last year are continuing and SBB intends to prioritize sales with the aim of strengthening the balance sheet and reducing the company’s indebtedness.
  • Brookfield Super-core Infrastructure Fund and SBB have agreed to prioritize growth within Europe over the upcoming years. A process has been initiated to develop the strategy for establishing these operations.
  • SBB has built its first solar park, which produces 10 GWH. SBB will continue to invest in renewable energy with the aim of becoming self-sufficient in renewable electricity by
  • SBB’s ownership in JM is a strategic long-term holding that fits well with the company’s strategy of owning unique assets.

2022 was a year characterized by a number of priorities that SBB carried out according to plan:

  • Sales: We have stated clearly that we will conduct sales to strengthen our balance sheet. SBB has shown that the company holds very liquid assets and has sold assets for apx. SEK 25bn, in line with their book values, in one of the most challenging markets of our times. Of the sales that have been completed, SEK 10.5bn remained to be paid (of which SEK 6.6bn was received after the end of the year). In the fourth quarter, we even sold shares in joint ventures for about SEK 2bn.
  • Diversified financing: SBB enjoys a close and long-term relationship with its banks. Negotiations are in progress with three Swedish banks to extend bank loans with a volume of approximately SEK 12bn. At the end of July, SBB implemented its first unsecured US Private Placement (“USPP”) of USD 100m with five and ten year maturities. Together with the Schuldschein financing that SBB issued in June, the USPP transaction is a further step in the company’s efforts to diversify its funding sources and demonstrates SBB’s strength in the global capital market.
  • Neobo Fastigheter AB was distributed to shareholders before the end of the year. Since 10 February this year, Neobo has been listed on Nasdaq First North Growth Market.
  • On 30 November, SBB signed a non-condi- tional agreement to sell a 49-percent holding in its educational social infrastructure portfolio to Brookfield for SEK 9.2bn with contingent purchase considerations of up to SEK 1.2bn to be paid in cash. SBB perceives considerable demand from infrastructure funds and other long-term institutional investors to both acquire properties from SBB and to co-invest in social infrastructure alongside SBB.

Stable core operations

The core of SBB’s operations is its long-term ownership of secure, inflation-protected cash flows from property management of social infrastructure in the Nordic region. SBB also owns stable Swedish rent regulated residentials, for which rent levels are low.

Strong net operating income, high interest coverage ratio and strong increase in cash flow

The core business continued to deliver strong net operating income over the quarter. Our net operating income for the fourth quarter came in at SEK 1,105m. Net operating income over the year increased by 21 percent, from SEK 4,047m to SEK 4,881m. This has contributed to a strong interest coverage ratio corresponding to a multiple of 3.9, despite rising interest rates. Fixed interest is an insurance premium for times like these. SBB had an average interest rate of 2.12 percent at the end of the year. At the end of the fourth quarter, our fixed interest term was 3.2 years (3.6). Given that 78 percent of our borrowings carry fixed interest rates, it will take some time before higher interest rates have an impact on SBB’s earnings and there will be time for these to be offset by inflation-adjusted rental income.

Unrealized decreases in property and currency values, as well as extensive unreported overvaluations in the debt portfolio

It is no secret that our holdings in listed assets have decreased in value. Nor are people unaware that the entire market is concerned about higher construction and financing costs, impacting in turn the values of our building rights and project operations.

External valuations of all of our properties were conducted in the fourth quarter. The outcome shows a decline in value of SEK 4.6bn. We have also written down our entire goodwill on the segment containing building rights properties. In the second quarter, we pointed out that we prioritize paying down short-term debt and focusing on extending both interest and capital maturities. This is also why we chose not to use our cash balances in a volatile market to fully hedge our non-current currency exposure.

Unrealized changes in currency values has no impact on SBB’s cash flow. SBB receives sufficient income in EUR to cover its interest payments in that currency. At the same time, the interest rates on SBB’s long-term Euro bonds are low, meaning that SBB has major unreported surplus values in its debt portfolio.


SBB’s goal is to be climate positive throughout the value chain by 2030. The analyst firm Sustai- nalytics assesses SBB’s ESG risk as very low (at 10.7, with the limit for negligible risk being 10) and the risk management is considered to be strong. SBB has been named as one of the top companies in terms of its ESG performance by Sustainalytics (ESG Regional Top Rated 2023). Sustainalytics monitors and rates more than 15,000 companies globally and presents the best performing companies annually. In the fourth quarter, ISS ESG raised SBB’s ESG rating to Prime, meaning that SBB’s shares and bonds are classified as a “responsible investment”.

SBB is pursuing the largest certification project in accordance with Miljöbyggnad iDrift to date. Our newly built solar park is expected to deliver an annual output of about 10 GWh over a normal year. This corresponds to five percent of SBB’s total electricity consumption. Another example is the collaboration with Telia which exchanges the heat generated from cooling its server hall with SBB, providing heating for SBB’s properties in the Municipality of Haninge. The properties that will be heated with surplus heat from Telia’s local server hall include the Haninge municipal building, the Söderbymalmsskolan school and the Terrassen elderly care unit. For SBB, the energy project entails slightly more than 100,000 m2 of property space becoming self-sufficient in heat, corresponding to annual savings of approximately 5,600 MWh.

SBB supports Mentor and Läxhjälpen (study support) and, in the summer of 2022, we provided 300 summer jobs for young people. Furthermore, in accordance with the resolution of the Annual General Meeting, we have contri- buted SEK 50m to UNHCR’s work in Ukraine. It is our hope that this contribution will make it possible for people fleeing the war in Ukraine to get a roof over their heads, protection, security, integrity, comfort and health.

Property development

SBB is a long-term partner of the public sector in the Nordic region. Project and property development is an important part of SBB’s role as a community builder, in which we develop social infrastructure in the form of rent-regulated residentials in Sweden, as well as buildings and premises for socially important functions in the Nordic region. The operations are divided between two principal stages, (i) developing building rights on SBB’s own land and, (ii) subsequently producing new commu- nity service properties or housing in markets with high demand. The current market situation, with both increasing financing and construction costs, has entailed both authorities and municipalities postponing a number of planned projects, meaning in turn that these projects will have to be implemented at a later date, meaning that it is critical for the operations to be prepared with an attractive portfolio of building rights to meet these needs.

SBB’s development of building rights over the year successfully delivered slightly less than 300,000 m2 GFA (equivalent to 4,600 apart- ments) in new zoning plans that had gained legal force. Our zoning plan for Nöthagen in Nyköping – one of Sweden’s largest zoning plans including residentials, schools and healthcare, gained legal force in the fourth quarter. Over the year, we sold some 80,000m2 GFA, demonstrating the value of continuing to generate building rights in attractive locations in growth areas.

Our current production has a yield to cost of 4.7 percent in new production and 5.1 percent in existing portfolios and we completed 765 apartments and about 80,000 m2 of community service properties over the year. In ongoing production, we have a reprocessing rate of 61 percent, with 96 percent of residential production being located in Sweden’s university cities, and with 51 percent of residentials having low, investment-support rent levels. The projects currently in progress will be completed in 2023-2025 and will have then added a total SEK 417m to SBB’s net operating income. Having said that, I would like to highlight that we have a very strong and competitive project portfolio with low risk of vacancies and with a high reprocessing rate and we are certain that our building rights portfolio will be critical in meeting future needs for residentials as well as for community service properties.


At the end of 2022, SBB had SEK 4.9bn in cash and cash equivalents and unconditionally signed agreements that provide a liquidity of SEK 10.5bn (SEK 9.2bn of which represented the minority stake sold to Brookfield, SEK 6.6bn of which has already been paid to SBB and used to reduce our debt, the remaining SEK 2.6 billion is expected to be paid out before the end of first quarter 2023). We see the bond markets starting to open up and the pricing of our bonds improving for each day that passes. Our bond maturity over the next 12 months is approx- imately SEK 3.8bn, with the first SEK 1bn having been repaid on 1 February. However, we expect to secure new financing in the bond market already this year.

Rental income from comparable portfolios (like-for-like) increased by 4.0 percent in 2022, equivalent to 1.2 percentage points above inflation for 2021, on which the rent increases implemented in 2022 were based. Since the company’s inception, SBB has reported an average annual increase in rental income in comparable portfolios (like-for-like) by slightly more than 1 percent above base CPI. Rental income from comparable portfolios is expected to increase by about SEK 400m in 2023.

Earnings capacity per Class A and B share comes in at SEK 2.11. Beyond that, income for 2023 increased by SEK 0.19 per Class A and B ordinary share through the completion of new production projects. In summary, income from property management operations amounted to SEK 2.30 per Class A and B share. In addition, SBB conducts successful property development operations that, in 2022 and in early 2023, sold a total 110,000 m2 GFA in building rights.

The stable inflation-protected cash flow from SBB’s core operations ensures continued strong dividends for our approximately 350,000 shareholders. For the 2023 Annual General Meeting, the Board proposes a dividend of SEK 1.44 per ordinary A and B share, split between 12 monthly dividends. In a similar way currently offered by Brookfield in Canada, SBB will make it possible for shareholders to choose whether the dividend on Class A and B ordinary shares, as well as on Class D shares, should be reinvested in Class B shares (according to a so-called DRIP – Dividend ReInvestment Plan) or paid out in cash. The idea is to make it possible for shareholders, who so desire, to straightforwardly reinvest their dividends into new Class B shares in SBB without incurring any transaction costs. SBB continues to focus fully on its core business of delivering much-needed social infrastructure. In 2022, we have delivered and are working with full confidence to continue delivering a good return to our shareholders and credit investors.

Ilija Batljan
CEO and founder