(Bloomberg) -- Europe’s corporate bond market will likely see more issuance from Nordic landlords in 2025 after a two-year funding crunch eased this fall with issues by Heimstaden Bostad AB and Castellum AB.
The region’s property firms face a €10.6 billion ($11 billion) mountain of maturing notes over the next 12 months, having loaded up on debt during the cheap-money era. A subsequent surge in borrowing costs at a time of falling property valuations fueled a funding crunch in 2023, with companies in Sweden being particularly hard hit.
Over the past months, though, the market began opening up again amid a series of interest-rate reductions by the European Central Bank and credit spreads in the sector trending lower.
The deals by Heimstaden and Castellum “should be a sign that when looking forward into 2025, we expect the real estate market to continue to be more active,” said Johan Hansen, a debt capital markets banker at Danske Bank A/S in Stockholm.
Heimstaden Co-Chief Executive Officer Christian Fladeland, who runs one of Europe’s biggest residential landlords, told Bloomberg News that the company would like to sell more notes to balance its sources of funding away from bank debt. In past months, the group priced €1 billion ($1 billion) of bonds — split evenly across hybrids and senior unsecured — the first such issuance in years.
“The absolute maximum we would issue next year is €1 billion if we were to go out to the market,” Fladeland said by phone. The company’s refinancing needs in euros center on €676 million of outstanding notes due in July, he added.
Earlier this month, the company held a series of investor calls arranged by JPMorgan Chase & Co and Nordea Bank Abp, Bloomberg News reported. Following five days of meetings, Fladeland said the company “will take the feedback into consideration over the holiday break as we look into the first part of next year.”
In a sign that the sector is not fully out of the woods, Heimstaden Bostad’s main owner — Heimstaden AB — said Friday that it was deferring interest payments on a hybrid note issued in 2021 to improve its credit profile. The announcement prompted ratings firm Standard & Poor’s to classify the securities as defaulted.
Domestic Saturation
With base rates trending lower again, landlords such as Fastighets AB Balder have returned to local-currency domestic bond markets in numbers not seen since a peak in bond sales in 2021. To avoid saturating them, companies are once again considering tapping much deeper international markets.
“A euro bond issue may well be something that we will consider for 2025,” Balder Chief Financial Officer Ewa Wassberg said in an interview. Selling notes worth €500 million each year going forward “would suit our funding plan well, in terms of funding mix,” she said.
When it comes to financing, Wassberg added, “we expect the cost to have peaked recently, and should come down somewhat during the coming quarters.”
Nordic property firms raised €14.6 billion in new debt so far this year across several currencies — an increase of about 250% from 2023, according to data compiled by Bloomberg. Still, the tally is dwarfed by the record volume of 2021, when more than €28 billion worth of new supply came to market.
“We’ll be seeing even more real estate supply in 2025 than what we saw in 2024,” said Nordea Bank abp’s head of bond syndicate, Povl Bak-Jensen.
(Updates with Heimstaden AB hybrids in 8th paragraph.)
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