SBB Norden (SBB) Status Update summary

Transaction terms

• A 49% stake in EduCo was sold to Brookfield for SEK 9.2bn upfront cash plus earn-outs of up to SEK 1.2bn; 51% ownership is retained and 100% of EduCo will be consolidated.

• The contributed public-education portfolio had a Q3 2022 book value of SEK 44.9bn; transaction price was SEK 43.7bn, with value ranging from a 2.7% discount to a 2.7% premium to book value depending on earn-outs.

• Two earn-outs expire six years after first closing and depend on refinancing terms and net operating income yield from new developments and acquisitions.

• Brookfield receives its stake in a newly formed subsidiary; EduCo will pay a 1.8% annual asset-management fee based on net operating income.

EduCo portfolio and operations

• The portfolio comprises 585 income-producing Nordic public-education assets, with 55% of GAV in Sweden, 38% Norway, 5% Finland and 2% Denmark.

• 2023E revenue is SEK 2.3bn and NOI SEK 1.9bn; net initial yield is 4.4% on 2023E NOI and 4.1% on Q3 2022 NOI earnings capacity, both excluding earn-outs.

• Leases have a 13-year weighted average term; approximately 95% of portfolio GAV is in AAA-rated countries and 5% in Finland, rated AA+.

• EduCo will be managed by SBB under an asset-management agreement; Ilija Batljan will chair the subsidiary and Jenny Asmundsson will lead operations.

Financial impact and financing

• Proceeds will mainly support deleveraging; pro forma loan-to-value is approximately 42.4% versus 46.9% at Q3 2022, and interest coverage is 5.1x versus 4.8x, pro forma for the transaction and other stated actions.

• EduCo financing includes approximately SEK 6.9bn of existing external bank debt and SEK 14.5bn of intercompany financing for up to six years at a fixed 3.0% rate.

• EduCo targets a 50–55% loan-to-value ratio and intends to refinance the intercompany loan at market terms in the medium term.