The giddy rise and spectacular fall of Swedish property giant SBB
Just five years after Ilija Batljan founded SBB, the property giant had already made him a dollar billionaire. The company's collapse is now a real, if hopefully manageable, threat to Sweden's financial system.
What is SBB?
Samhällsbyggnadsbolaget (SBB), literally meaning "the social buildings company", expanded rapidly after it was founded in March 2016 by buying municipal buildings such as care homes, preschools, and schools, with a view to renting them back to the municipalities that sold them.
The company's founder and, until recently, CEO, Ilija Batljan, had realised that municipal and regional politicians in Sweden could easily be convinced to sell off their properties.
This was the case even after the The Swedish Association of Local Authorities and Regions wrote a report in 2019 showing that it cost, at the very least, 60 percent more for a municipality to sell and rent back a property over 25 years than to keep the property in municipal hands.
Who is Ilija Batljan?
Batljan came to Sweden from Montenegro in 1993 at the age of 26 and quickly went on to get a PhD in Economics from Stockholm University. He made his name as a Social Democrat politician, ending his political career as mayor of Nynäshamn, south of Stockholm.
He was fired as CEO of Rikshem, a property company owned by two of Sweden's leading pension funds, in 2015, after an investigation in the newspaper Dagens Industri found he had misused company funds to take himself and his relatives on trips and to take municipality officials out for lavish meals. Rikshem appointed KPMG to investigate the irregularities, with the firm publishing a critical report.
He was also accused of misusing his position to get a lease on an apartment in Östermalm.
How rapidly did SBB expand?
SBB grew with astonishing speed. Starting by acquiring a single care home in Örkelljunga in April 2016, by mid-2022 it owned 2,537 properties across Sweden, Denmark and Norway valued at a total of 157 billion kronor, meaning Batljan had managed to build up one of Sweden's biggest property companies in a little over eight years.
The company's share price shot up nearly sevenfold from 10.5 kronor when it was floated in April 2017 to 67 kronor at its 2021 peak, valuing the company at close to 100 billion kronor, and Batljan worked hard to attract small retail shareholders with the promise of a safe, reliable dividend.
The company, also, however took on enormous amounts of debt.
By March this year, SBB had over 70 billion kronor in long-term loans and 14 billion kronor in short-term loans.
But Batljan claimed that as the company's tenants were regional and municipal governments, the company benefitted from such reliable cashflow that the financial risk was close to zero, and that it could withstand an interest rate as high as 10 percent without running into difficulties.
How rapidly did SBB see its business collapse?
SBB's collapse came even faster than its rise, starting with the short-seller Viceroy Research publishing a report criticising the company's "absurd valuation" in February 2022. By the end of 2022, the company was subject to more and more attention from short sellers, who borrow companies' shares, promising to sell them back at a later date, betting that the price will have fallen.
By October 2022, the share price had fallen to 11 kronor, a fall of more than 80 percent in less than a year.
In April 2023, the company spooked investors even more by reporting an unexpectedly large loss and announcing plans to raise 2.6 billion kronor in new capital through issuing new shares.
In May, the credit rating companies S&P and Fitch both lowered SBB's credit rating to junk level, pushing up its interest payments and putting its finances under even more strain.
At the end of May, SBB's board announced crisis plans to sell the company, its subsidiaries or its individual assets in an attempt to rescue its finances. It also said it would suspend interest payments on bonds due on June 15th, meaning it would be in default.
On June 2nd, Batljan resigned as chief executive, although he remains the biggest shareholder with 18.4 percent of the votes and 4.8 percent of the capital.
What happens next?
Niklas Wykman, Sweden's financial markets minister, has tried to take a hands-off approach, telling SVT in an interview on May 31st that other properties were keen to buy up SBB's assets, meaning that he believed there was no major risk to the financial system that would require government intervention.
"The main assessment is that this can be resolved on a market basis. The company that took on too much risk, too much debt, can sell to those with less debt. In this way, this can be stabilised."
Daniel Barr, the new head of the Sweden's Financial Supervisory authority, has also said that distressed real estate companies "are not our responsibility".
Sweden's opposition Social Democrats have followed calls from the Green and Left parties for the government to help municipalities and regional governments to buy back the properties they unwisely sold to SBB, calling the situation "a once in 40 years opportunity".
But the party's leader Magdalena Andersson said the government would have to act "very quickly" not to miss out.
One issue is whether the government will intervene to stop sensitive assts like the barracks of the army's Dalarna Regiment in Falun or Swedish police stations being sold to overseas companies, even Russian or Chinese ones.
Andreas Cervenka, the economics journalist who was highly critical of SBB in his hit 2021 book Girig-Sverige, has called for Batljan to be prosecuted for fraud.
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What is SBB?
Samhällsbyggnadsbolaget (SBB), literally meaning "the social buildings company", expanded rapidly after it was founded in March 2016 by buying municipal buildings such as care homes, preschools, and schools, with a view to renting them back to the municipalities that sold them.
The company's founder and, until recently, CEO, Ilija Batljan, had realised that municipal and regional politicians in Sweden could easily be convinced to sell off their properties.
This was the case even after the The Swedish Association of Local Authorities and Regions wrote a report in 2019 showing that it cost, at the very least, 60 percent more for a municipality to sell and rent back a property over 25 years than to keep the property in municipal hands.
Who is Ilija Batljan?
Batljan came to Sweden from Montenegro in 1993 at the age of 26 and quickly went on to get a PhD in Economics from Stockholm University. He made his name as a Social Democrat politician, ending his political career as mayor of Nynäshamn, south of Stockholm.
He was fired as CEO of Rikshem, a property company owned by two of Sweden's leading pension funds, in 2015, after an investigation in the newspaper Dagens Industri found he had misused company funds to take himself and his relatives on trips and to take municipality officials out for lavish meals. Rikshem appointed KPMG to investigate the irregularities, with the firm publishing a critical report.
He was also accused of misusing his position to get a lease on an apartment in Östermalm.
How rapidly did SBB expand?
SBB grew with astonishing speed. Starting by acquiring a single care home in Örkelljunga in April 2016, by mid-2022 it owned 2,537 properties across Sweden, Denmark and Norway valued at a total of 157 billion kronor, meaning Batljan had managed to build up one of Sweden's biggest property companies in a little over eight years.
The company's share price shot up nearly sevenfold from 10.5 kronor when it was floated in April 2017 to 67 kronor at its 2021 peak, valuing the company at close to 100 billion kronor, and Batljan worked hard to attract small retail shareholders with the promise of a safe, reliable dividend.
The company, also, however took on enormous amounts of debt.
By March this year, SBB had over 70 billion kronor in long-term loans and 14 billion kronor in short-term loans.
But Batljan claimed that as the company's tenants were regional and municipal governments, the company benefitted from such reliable cashflow that the financial risk was close to zero, and that it could withstand an interest rate as high as 10 percent without running into difficulties.
How rapidly did SBB see its business collapse?
SBB's collapse came even faster than its rise, starting with the short-seller Viceroy Research publishing a report criticising the company's "absurd valuation" in February 2022. By the end of 2022, the company was subject to more and more attention from short sellers, who borrow companies' shares, promising to sell them back at a later date, betting that the price will have fallen.
By October 2022, the share price had fallen to 11 kronor, a fall of more than 80 percent in less than a year.
In April 2023, the company spooked investors even more by reporting an unexpectedly large loss and announcing plans to raise 2.6 billion kronor in new capital through issuing new shares.
In May, the credit rating companies S&P and Fitch both lowered SBB's credit rating to junk level, pushing up its interest payments and putting its finances under even more strain.
At the end of May, SBB's board announced crisis plans to sell the company, its subsidiaries or its individual assets in an attempt to rescue its finances. It also said it would suspend interest payments on bonds due on June 15th, meaning it would be in default.
On June 2nd, Batljan resigned as chief executive, although he remains the biggest shareholder with 18.4 percent of the votes and 4.8 percent of the capital.
What happens next?
Niklas Wykman, Sweden's financial markets minister, has tried to take a hands-off approach, telling SVT in an interview on May 31st that other properties were keen to buy up SBB's assets, meaning that he believed there was no major risk to the financial system that would require government intervention.
"The main assessment is that this can be resolved on a market basis. The company that took on too much risk, too much debt, can sell to those with less debt. In this way, this can be stabilised."
Daniel Barr, the new head of the Sweden's Financial Supervisory authority, has also said that distressed real estate companies "are not our responsibility".
Sweden's opposition Social Democrats have followed calls from the Green and Left parties for the government to help municipalities and regional governments to buy back the properties they unwisely sold to SBB, calling the situation "a once in 40 years opportunity".
But the party's leader Magdalena Andersson said the government would have to act "very quickly" not to miss out.
One issue is whether the government will intervene to stop sensitive assts like the barracks of the army's Dalarna Regiment in Falun or Swedish police stations being sold to overseas companies, even Russian or Chinese ones.
Andreas Cervenka, the economics journalist who was highly critical of SBB in his hit 2021 book Girig-Sverige, has called for Batljan to be prosecuted for fraud.
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