The crisis around Sweden’s Samhällsbyggnadsbolaget i Norden (SBB) intensified this morning as the country’s Financial Supervisory Authority (Finansinspektionen, FI) launched an investigation into asset valuations and whether the housing giant broke accounting rules.
The watchdog said the Council for Swedish Financial Reporting Supervision (Nämnden för svensk redovisningstillsyn) – which reviews the financial reports of Swedish listed companies for FI – had submitted a case on SBB.
“FI is now therefore starting an investigation to see if Samhällsbyggnadsbolaget i Norden AB has violated applicable accounting rules and whether FI should intervene against the company,” the FSA said, with the probe relating to SBB’s 2021 report.
The authority said it would look at SBB’s valuation of property in some of its portfolios, accounting methods for asset acquisitions, disclosure of significant assumptions and use of alternative accounting metrics.
SBB responded in a statement saying it had been having an ongoing dialogue with the Council for Swedish Financial Reporting Supervision, with the council’s review having been disclosed in SBB’s 2021 and 2022 annual reports.
“The investigation covers certain valuations of properties and acquisitions that are reported in the annual reports for the financial years 2021 and 2020, respectively, which have been audited by the company’s auditor,” SBB said, adding that the probe related to SBB on a group level and did not cover joint ventures or EduCo.
“SBB has continuously had dialogue with the Council and has retained the view that SBB’s assessments of the treatment of the transactions and valuations are correct,” the firm said.
It added that it had also contacted the Swedish FSA after the matter was submitted to the watchdog, and was now awaiting the agency’s response.
“SBB is looking forward to a positive and constructive dialogue with the Swedish FSA,” the Stockholm-based firm said.
SBB appears perhaps the worst-hit Swedish REIT in the commercial property crisis engulfing the sector in recent months, with its share price having plummeted to SEK3.5 today from around SEK19 at the beginning of 2023.
While commercial property prices have fallen internationally, heavy use of debt for dealmaking in 2021 and subsequent rising interest rates have left Swedish property companies struggling to refinance.
Yesterday, SBB announced it was postponing its dividend until next summer, three weeks after the ousting of CEO and founder Ilija Batljan as the board said it would “broaden its review of strategic options to maximize the value for SBB’s shareholders”.
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