Year-end Report 2020

Samhällsbyggnadsbolaget i Norden AB (SBB)’s income comprises secure cash flows from property management of social infrastructure, which are supplemented with three income-generating value-adding strategies:

  • Property development
  • Renovations/investments
  • Transactions

Combined, these four value-generating areas delivered profit before tax of SEK 10,341m for 2020 and profit after tax of SEK 9,084m. Adjusted for deductions for earnings attributable to preference shares, series D shares and hybrid bonds and minority shares, profit for the period amounted to SEK 6.41 per series A and B ordinary share.

SBB’s long-term efforts are yielding good results in terms of ecological, social and economic sustainability. We are investing extensively to reduce our climate impact.

Sharp increase in net operating income and cash flows from property management

Compared with 2019, profit from property management increased by 284 percent to SEK 2,474m (645). A sharp increase in net operating income to SEK 3,479m (1,265) is the principal explanation for the strong trend in profit from property management. At the same time, we continue to lower our average interest rate, which was 1.31 percent (1.76) at the end of the period. SBB only has a unsignificant exposure to variable interest rates. The average interest duration for all interest-bearing liabilities is among the longest in the Nordics at 4.5 years (2.8) and the average debt maturity was 4.8 years (3.4).

Cash flow from operating activities before changes in working capital increased by 242 percent to SEK 2,232m (653) for the full year. Adjusted for non-recurring effects for repurchases of expensive loans and restructuring costs, cash flow for the nine-month period ended up at SEK 2,483m (933).

In 2020, we succeeded in raising the surplus ratio to 68 percent, from 63 percent in 2019. Our renovation projects contributed to net operating income increasing, like-for-like, by a strong 4.1 percent, while rental income increased by 3.2 percent.

Covid-19 has gone from being a pandemic to also becoming a greatly increased risk to the world economy that leaves no one indifferent. The great uncertainty that currently prevails around economic development requires focus and hard work. During the year, SBB has received 99.8 percent of our rental income, which is probably the highest of all listed real estate companies in Europe. Community service properties and residentials have been proved to be the least affected by the crisis, but crisis leaves no one unaffected. On the other hand, this is neither the first nor the last crisis that long-term focused companies have to deal with. Crises come and go and you have to be humble in the face of this, but our task is to be a reliable and long-term societal player that delivers shareholder value, good profitability and strong results in all situations.

Europe’s leading property company in value-adding strategies

We supplement our secure cash flows from property management with three income-generating, value-adding strategies: generating value through property development, renovations and transactions. In property development, we are now focusing on using our extensive portfolio of building rights to construct new housing and community service properties based on the needs of the municipalities, both to be managed in-house, as well as through joint ventures.

Project and property development delivered profit of SEK 2,224m in 2020, exceeding our target of generating an average SEK 1,000-1,400m annually in profit from property development. SBB is focusing on constructing environmentally friendly rent-regulated residentials in Stockholm and Gothenburg. We currently have 1,681 apartments in production. As of 31 December 2020, SBB’s portfolio of building rights amounted to approximately 2,518,000 m2 GFA for social infrastructure, corresponding to approximately 34,000 apartments, making SBB one of the leading property developers in the Nordics. The integration of Sveafastigheter has further strengthened SBB’s position as the Nordic region’s leading property developer.

With regard to renovations, we managed to exceed our target of 600 apartments annually by 16 percent. SBB completed renovations of 695 apartments in 2020. At the end of the year, a further 73 apartments were undergoing renovation, while renovation of 164 apartments was planned to commence in the first quarter of 2021. Combined with the continued need to renovate community service properties, this generates potential for strong recurring earnings.

Elderly people and people with disabilities are currently experiencing shortages of functional elderly care and LSS housing units. SBB views contributing new elderly care units and LSS housing as an important part of its investment in social sustainability. The number of elderly care units to be managed in-house is set to increase sharply, with total rental income from elderly care and LSS housing units doubling by 2025, from just over SEK 800m to SEK 1.6bn annually. By the end of 2020, our income from elderly care units and LSS homes had increased to SEK 954m.

Key ratios for a BBB+ rating have been delivered

In 2020, SBB achieved a significant reduction in its loan-to-value ratio. At the end of the period, our pro forma net debt, adjusted for cash inflows from properties that have been sold but not yet transferred, liquid financial assets and 12 months’ earnings divided by total capital, in accordance with S&P’s definition of the loan-to-value ratio, amounted to 45 percent. According to S&P’s loan-to-value definition, our reported adjusted net debt was 50 percent at the end of the year (see table on next page).

Based on the key ratios we have reported, we therefore have a strong BBB rating and have, according to our calculations, fulfilled the key ratios that are most important in securing a BBB+ rating. The finance policy and the Board’s clearly expressed ambition regarding the rating strengthen the ambition to achieve an A rating in the long term. The quality of our assets, both in terms of the security of the rental flows and of their liquidity in the transaction market, has proven to be among Europe’s most secure in challenging times. We continue to raise our interest coverage ratio, which was a multiple of 4.1 at the end of the year. We have slightly more than SEK 70bn in unencumbered assets; cash balances, including liquidity from properties that have been sold but not yet transferred and financial assets of SEK 18.7bn, as well as available credit commitments of SEK 29.3bn.

Sustainability is the core of our business model

SBB’s properties use only 100 percent renewable electricity, which is also what SBB offers to its residential tenants. SBB offers green leases and inventoring risks linked to climate change. Investments to upgrade rental apartments and our residential areas are combined with environmental decontamination. Of the 695 apartments renovated in 2020, 86 percent have been environmentally decontaminated.

During the fourth quarter, SBB procured solar cell installations that will produce some 227,000KWh of electricity annually. At the same time, SBB is continuing to invest to reduce its energy consumption by between 25 percent and 50 percent in a number of residential areas. An example is a project in the Västland 26:39 property in Sundsvall. This is a residential property of approximately 13,400 m2, in which a combination of district heating, FX ventilation, geothermal heat pumps, waste water heat exchangers and additional insulation will more than halve the energy consumption. Besides reducing climate impact through lower energy consumption and by generating renewable energy, SBB is contributing to climate adaptation by prioritizing new production in wood. According to Vision 2030, SBB’s target is for at least 50 percent of all of its new production to be in wood. In 2020, 52 percent of new production in progress, that is 54,965 m2 of a total 104,373 m2 was in wood.

SBB’s subsidiary, Sveafastigheter, has built Sweden’s largest energy-positive building, Neptun, in accordance with the Miljöbyggnad Guld environmental building standard, and, in the fourth quarter, completed 99 apartments in the Cykelkungen mobility building in Uppsala, 96 sheltered housing apartments, with positive energy technology, in the Hydran complex in Västerås, and 30 space-efficient apartments on Apelvägen in Nacka. SBB’s projects and property development contribute to building sustainable communities by beginning with communication-adjacent locations and refining previously developed land, helping alleviate pressure to develop significant green areas.

In the fourth quarter, SBB decided to offer all Swedish municipalities the opportunity to use vacant premises free of charge to commence Covid-19 vaccination efforts. The Municipality of Haninge has initiated vaccinations of healthcare and residential care personnel at an SBB property. Over the year, SBB undertook a number of initiatives to support vulnerable small businesses and healthcare personnel. Additional initiatives in summertime employment resulted in 134 young people securing summertime jobs at SBB.

In 2020, Sveafastigheter won six land allocations in the City of Stockholm, focusing in particular on social sustainability. In the fourth quarter, Sveafastigheter also conducted a larger-scale process with participation of about fifty young people from the Fryshuset youth centre as part of its development of housing at Sjöstadshöjden in Stockholm. In Kista/Husby, 181 homes and a new urban street are being created, connecting the districts. In Enskede, 118 housing units for the elderly are being developed, with the community in focus. In Hagsätra, 129 homes are being created that will increase security in the neighbourhood. In Rågsved, 38 homes are being developed with the perspective of children in focus. In Bromsten 264 apartments are under development where mobility and a farm environment will be in focus. In Hässelby, additional buildings with 47 rental apartments are being created.

In the fourth quarter, under its new framework for sustainable financing, SBB issued an eight-year social bond of EUR 700m with a coupon rate of 0.75 percent. This is the Nordic region’s first social bond to date.


SBB’s assets are among the most demanded in a low interest rate environment in which investors seek a stable and secure return. Our resilient portfolio, with low-risk assets in the form of Swedish rent regulated residentials and Nordic social infrastructure, including elderly care homes, schools, preschools and LSS properties, provides a great foundation. What generates value, however, is our team and our platform, with its full-scale infrastructure for growth and the implementation of our value-adding strategies. Two years ago, we communicated our view that we would be able to deliver the highest annual increase in net asset value among all listed Swedish property companies for the years 2019-2021. The outcome for 2019 ended up at a high 73 percent per series A and B ordinary share. We continued to deliver strongly in 2020, increasing our net asset value per ordinary A and B share by 41 percent.

Property is often seen as a cyclical asset with few opportunities for growth and highly dependent on interest rate fluctuations. Let me start with interest rates – the fact is that all shares are affected by interest rates, not only shares in property companies. What a property company can do is ensure that it has longer periods of fixed interest. SBB’s assets can be described as defensive and include Swedish rent regulated residentials, elderly care homes, schools, LSS homes and other investments in social infrastructure. In terms of results and growth, SBB has delivered and continues to do so. To illustrate this, I compare SBB’s growth in income and profit with some of the stars of the Stockholm Stock Exchange.

We are also concerned that the result will benefit our shareholders in the form of annually increasing dividends. This year, the Board of Directors proposes a dividend of SEK 1 per series A or B share, corresponding to an increase of 67 percent compared with the preceding year. Our platform, in the form of our employees, their skills and the associated infrastructure, represents our most important asset. To support the next stage of our growth journey, we are continuing to invest in our platform. And we will continue to grow. In conclusion, a big thank you to all employees, the Board, tenants, suppliers and shareholders who supported our trip during the first five years. The future is ours.

Ilija Batljan
CEO and founder