Our 'BBB' long-term rating on Sweden-based residential and community service property manager Heba Fastighets AB (publ) and the stable outlook on the rating are unchanged following revised expectations on financial development after announcement of results for the third quarter of 2025.
Heba has slightly exceeded our operational expectations for 2025e, driven by lower operating costs. Leverage is modestly above projections, reflecting SEK 310m in share repurchases, about 6% of Heba's total outstanding shares in 2025, and smaller positive fair value changes in the property portfolio than anticipated.
We have updated our forecast for the company's financial performance over 2025e–2027e, reflecting revised expectations compared with our previously published forecast on 4 Mar. 2025. In addition to the factors previously outlined, we now anticipate more projects entering the construction phase and certain contracted acquisitions not included in the prior forecast. We expect Heba to maintain sufficient distance from its negative rating drivers, with an NCR-adjusted interest coverage ratio above 2.2x and net LTV below 50%. The addition of community service properties is expected to enhance the company's cash flow generation without materially increasing tenant concentration. Demographic trends should support demand for Heba's targeted property types, underpinning rental rates and occupancy.
Forecast assumptions:
We have:
- lowered expectations for fair value changes in property values, reflecting weaker-than-anticipated year-to-date performance through the third quarter of 2025;
- increased cash outflows related to projects and acquisitions in 2025-2027;
- revised our projected average interest rate due to favourable market rates and attractive terms on refinanced debt, which have offset the negative impact of expiring swap contracts;
- revised the share repurchases in 2025 to SEK 310m; and
- revised up future dividend payments.
Based on these adjustments, we now expect the following key credit metrics for 2025–2027:
- NCR-adjusted net LTV of 46–47%;
- NCR-adjusted net interest coverage of 2.3–2.4x; and
- NCR-adjusted net debt/EBITDA of 15.4–16.4x.
While share repurchases increase the company's leverage and place capital at risk for a decline in the share price, we do not expect the company to cancel the shares, and believe they may use them for potential acquisitions or divest the shares. The decision to develop Villa Primus (SEK 830m total investment) in a joint venture with PEAB reflects a conservative approach to managing development risk and reduces ongoing cash outflows.
At the end of the third quarter, Heba had committed cash outflows exceeding available sources over the twelve months ending 30 Sep. 2026, which is weaker than typically expected for an investment-grade issuer. However, we consider the liquidity shortfall to be temporary, as we expect the company to refinance bonds maturing in March 2026 in the near term, maintaining its track record of committed sources exceeding uses. Project development is expected to be financed with committed capital. The company has SEK 1.9bn in unused credit facilities, which could be used for refinancing of maturing debt if necessary, and a significant proportion of unencumbered assets that could provide alternative liquidity if needed.
Related publications
i) Strong financing climate for Swedish real estate companies in an uncertain environment, 16 Sep. 2025.
ii) Swedish real estate snapshot (Q2 2025): Compressing credit margins upon refinancing expected to improve interest coverage, 1 Sep. 2025.
iii) Heba Fastighets AB (publ) 'BBB' long-term issuer rating affirmed; Outlook stable, 4 Mar. 2025.
This commentary does not constitute a rating action.
Contacts:
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
Sean Cotten, chief rating officer, +46735600337, sean.cotten@nordiccreditrating.com