Swedish real estate crisis deepens: Luxury developer faces bankruptcy
The Swedish commercial real estate market is grappling with serious problems. The local Tax Authority has filed a bankruptcy application for Oscar Properties Holding AB, joining the growing list of creditors demanding bankruptcy proceedings against the luxury apartment developer.
Oscar Properties, like many other smaller real estate owners like K2A Knaust & Andersson Fastigheter AB, has been desperately trying to sell assets to raise cash for debt repayment, as refinancing on the bond market has become too costly. However, according to Bloomberg, due to a lack of willing buyers, these efforts have proven insufficient.
Increase in bankruptcies and financing problems
According to Creditsafe data, the number of real estate sector bankruptcies increased by 73 percent in the first seven months of this year. Although the interest rate cut in May encouraged many companies in the real estate industry to reissue bonds in Sweden, some significant entities like Heimstaden Bostad AB and Samhallsbyggnadsbolaget i Norden AB (also known as SBB) are still absent from the debt capital markets.
Developers try to save themselves
Heimstaden, one of the largest residential property owners in Europe, is under pressure to sell apartments in several of its markets to avoid a costly downgrade to junk status.
By 19:00 GMT on Thursday, the company announced signing a new loan amounting to approximately 625 million, secured by assets in the Netherlands. This loan brought in a cash injection of approximately 170 million.
The situation for SBB is even worse. The company, whose assets are concentrated in Nordic countries, must rely on a more limited pool of regional banks. To secure more financing, the company is implementing a strategy to split the group into three parts: educational, social, and residential.
