Swedish property group SBB will issue SEK 2.36 bn (€204.2 mln) in preferential shares to an investment fund managed by Morgan Stanley Real Estate Investing (MSREI).
The agreement foresees that MSREI will hold a minority stake in SBB Residential Property, a newly-created SBB subsidiary consisting of rent-regulated residential properties in Sweden valued at SEK 6.2 bn (€536.5 mln) as of 30 June 2023.
The residential portfolio will in its entirety be operated and managed by SBB through an asset management agreement with SBB.
The preferential shares have no maturity date and no payment obligation, and rely on the return of capital on an exit or by SBB redeeming the shares.
Subject to customary closing conditions, the deal is expected to be completed by mid-August.
Leiv Synnes, CEO of SBB, said: ‘We are delighted to partner with Morgan Stanley Real Estate Investing, one of the leading investors globally in real estate. The transaction confirms the strong value proposition within our residential portfolio. The capital raise demonstrates the range of capital options available to SBB, further enhances our strategic flexibility and strengthens our group financial position. Together with other successful initiatives we have taken as part of our strategic review, we are working towards a transition to a stronger long-term financial profile.’
SBB may at any time direct SBB Residential Property to redeem all (but not part) of the preferential shares subject to a redemption price equal to an internal rate of return, on a SEK basis, of 13% per annum up until and including year five.
Vinge and Wistrand legally advised SBB, SBF Fonder served as commercial and technical advisor to MSREI, while Cederquist served as legal advisor.
SBB will use the proceeds from the offering to boost liquidity and elevate its financial profile amidst challenging economic conditions.
The landlord recently saw its credit rating downgraded to junk, while its shares lost over 90% of their value since peaking in 2021.
