SBB - comment

There are rumours that SBB is preparing to IPO its entire residential portfolio, but we are sceptical about the feasibility of any sale. A threat of SBB finding cash elsewhere could provide a stick to get Brookfield to pay the asking price for the Education Company stake. However, having poured cold water on the much smaller residential IPO SBB proposed, we think this is hope over reality. The book value of the residential assets is SEK36.3bn, and the current cap rate is c5%; the Neobo assets spun off in Dec-22 trade at an implied yield of >10%. The equity market is no more supportive than the debt market. Any Residential IPO would layer the SUNs, who would have to look through the equity retained by SBB for value. Alternatively, SBB could offer the SUNs equity in the Residential unit in return for postponing maturities, but the choice of SEB as book runner sits oddly with that idea. Right now it’s a lot of hope and conjecture.