(Bloomberg) -- The executive charged with steering the biggest listed residential property firm in Sweden is not planning to repeat the prior missteps of its majority owner, SBB.
On Friday, Samhallsbyggnadsbolaget i Norden AB — as SBB is formally known — will list as much as 44% of the shares in its housing division, Sveafastigheter AB, via an initial public offering in Stockholm. The move is part of a broader strategy by SBB to detoxify its brand and diversify its investor base after last year’s funding crisis.
“We have learned a lot,” Sveafastigheter Chief Executive Officer Erik Havermark said in an interview. Hallmarks of the spun-out company’s strategy will be a “conservative capital structure” and delivering growth organically “and not by acquisitions,” he added.
That would mark a far cry from SBB’s previous approach under former CEO and founder Ilija Batljan. His $13 billion property empire loaded up on cheap bond debt to acquire thousands of properties, but reached the brink of collapse last year as borrowing costs soared and house prices slumped 20%.
Batljan had pledged to increase dividends for 100 years, helping woo a loyal following of retail investors. Havermark, in contrast, has no plans to pay dividends in the near future. “We believe we can create best shareholder value through reinvesting our earnings in our standing assets and our development portfolio,” he said.
With roughly 14,500 apartments under management and a further 7,900 in project development or under construction, the soon-to-be listed group will be the biggest of its kind in Sweden. Pricing for Sveafastigheter’s IPO is estimated in the range of 39.5 Swedish kronor to 45.5 kronor per share, valuing the unit at about 7.9 billion kronor to 9.1 billion kronor ($760 million to $880 million).
Lenders DNB Bank ASA and SEB AB have helped organize the marketing of the offering to investors in the run up to Friday’s first day of trading. “We’ve had good meetings and there’s been great interest throughout the process,” Havermark said.
When it comes to Sveafastigheter’s valuation, the CEO says the development side of the business should have a greater weight. “I am not sure that everyone fully understands this part of our business and when comparing Sveafastigheter to other residential companies.” he said, adding the landlord is aiming to start construction of as many as 800 apartments each year.
Listed competitors include “aspirational peers” Heba Fastighets AB, John Mattson Fastighetsforetagen AB and Wallenstam AB, according to an investor presentation seen by Bloomberg News. The document also showed a loan-to-value ratio of 42.7%, giving SBB’s housing unit a measure of balance sheet health that was better than the median level of 53% for its peer group.
Such ratios and a funding model that is mostly geared toward bank loans “show that Sveafastigheter is a totally different company,” Havermark said.
(Updates with further CEO comment in 7th paragraph.)
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