Swedish Real Estate Conference
In the eye of the storm
In-person only conference
In the eye of the storm
The credit quality of Sweden’s commercial real estate (CRE) companies is under pressure from the effects of rising interest rates on credit metrics and property valuations, more difficult refinancing conditions, a weakening economic cycle and structural changes for some asset classes. Inflation-linked rental income growth is insufficient to counterbalance the effects of interest rate increases and slowing economic growth. We anticipate continued negative adjustments of CRE values, further straining credit metrics and ratings. While capital increases and asset disposals somewhat ease the pressure, the level of real estate transactions is fairly limited. Funding costs for CRE companies have significantly risen over the past 18 months due to investor caution and rapid interest rate increases. Compared to European peers, Swedish CRE companies face greater refinancing risks due to shorter debt maturities and substantial floating rates with low hedging, risking rapid deterioration in EBITDA interest coverage. The bond market is currently technically inaccessible for most CRE companies for refinancing due to high interest rates and low investor interest, leading to a shift towards secured bank loans. However, banks are likely to be selective in who they lend to. Moreover, their substantial exposure to the CRE sector raises questions about their ability to maintain ratings and competitiveness. Sweden’s bond market has not been tested in a market downturn, raising uncertainties over what would happen to bondholders’ respective banks in a potential restructuring process for distressed or defaulted companies. Governance risks from cross-ownership and majority-owned companies further limit access to capital, potentially requiring shareholders to share risk with banks. Against this unsettled backdrop, we consider whether the CRE sector is in the eye of the storm, whether it will get worse before it gets better or whether it is at the beginning of the end of the current cycle.
Agenda
08.00
CET
Registration & Networking Coffee
08.30
CET
Opening Remarks
Held in Swedish/English
08.35
CET
Real estate industry outlook – Credit quality is deteriorating
Held in Swedish
- Are the real estate companies in the eye of the storm?
- Operating performance remains robust with good rental growth
- Weak operating environment of some asset classes
- Short-dated maturities weaken liquidity profiles, refinancing challenges
- Sharply higher cost of debt weakens interest coverage ratios
- Lower valuations limit ability to reduce leverage through disposals
- Focus on cash preservation measures
- Cross-ownership and majority owners cause uncertainties over equity injections
- Rating actions driven by refinancing risks, liquidity risk, higher funding costs, weaker ICRs, property valuation declines and corporate governance
08.55
CET
Panel: Status of the property market
Held in English
- Are the leveraged CREs and indebted households a risk for the credit quality of Sweden? What is the knock-on effect on the economy?
- What would be the new normal level for interest rates?
- Future direction of the property market: Base case and downside scenario
- Direction of the equity market:
- Will there be investors for the equity injections companies need to perform to reduce refinancing risk?
- Why are Swedish real estate bonds trading so wide?
- Does credit or equity offer the best risk reward?
09.25
CET
Networking Break
09.55
CET
How does the Riksbank view the Swedish real estate market?
Held in Swedish
10.15
CET
The Real Estate Sector and its Financial Stability
Held in Swedish
10.25
CET
Panel: Financial systemic risks
Held in Swedish
- Rate current financial systemic risk (1-5). Are households, property firms escalating systemic risk?
- What second round of effects can we expect to see in the financial system or in the real economy?
- What is the government's role?
- If we see an increase in CRE exposures in the banks’ loan portfolios, how will that impact banks’ ratings?
- How can the CRE companies reduce refinancing risk?
- Banks’ view on the CRE market and potential downside?
Rolf Marquardt
Chief Risk Officer, Swedbank
11.10
CET
Economic outlook for Sweden
Held in Swedish
11.20
CET
Panel: Defaults in the Nordics
Held in English
- Overview of default trends and distressed exchanges in Europe
- Managing a default in the Nordics
- Overview of Nordic restructuring process
- Process for bond holders and banks
- Unencumbered assets sufficient to protect bondholders in real estate
- Discussion on US style liability management exercises and their potential viability in Europe
- Reset on capital structure what gets the new equity
12.05
CET
Closing Remarks
Held in English
12.10
CET
Close of conference
Why Attend
Hear from senior Moody’s analysts and expert guest speakers
Network with industry peers
Ask questions about real estate companies’ creditworthiness and financial stability