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Episode 2: Nonfinancial Companies: Slow economic recovery continues to strain credit quality

Overview

The aftermath of the coronavirus pandemic will impact real estate companies for some time to come – or not? Looking at operating- and financial performance of rated Nordic real estate companies, the impact so far is barely visible. It seems that companies may come out of the pandemic largely unscathed.

We believe, businesses will not go back to the way they operated before. Real Estate companies will use the crisis to reinvent themselves and increase their resilience, adapting their models and operations to the ”new normal”. However, building resilience needs to consist of much more than reopening workspaces and a return to pre-crisis strategies. Rather, companies should prepare for a slow re-entry and a choppy and multi-phased recovery.

For Sweden’s property market, which continues to benefit from healthy transaction volumes and still low though volatile interest rates, the pandemic’s longer impact remains uncertain. The macroeconomic environment weakened significantly in the second quarter of this year but has undergone a solid recovery since the summer.

The pandemic will produce winners and losers as it affects both demand and supply. It has also raised questions over how we work that is likely to affect demand for offices in future. We expect existing structural shopping trends to gather speed as a result of digitalisation and the rise of e-commerce, among other factors, which is in turn creating tailwinds for logistics assets.

With such factors in play, will the pandemic mark the beginning of the end of the current real estate cycle? And how much time do real estate companies have to prepare for the inevitable cooling of sector conditions?

The Riksbank has announced that it will purchase corporate bonds to support low funding costs and reinforce the capacity to act if credit supply for nonfinancial corporates deteriorates. The programme began in September. Will it prove a powerful tool to support sufficient liquidity in the secondary market if investor sentiment turns sour?


Day 1


Credit quality outlook and key risks for the real estate sector post-Covid-19
Agenda highlights:

  • Forecasts point to a significant weakening of GDP and a sharp rise in unemployment in 2020 in the Nordics, but the impact on real estate companies’ credit quality has to date been barely visible.
  • The office market is in waiting mode. What will the short- and long-term impact be as the effects of the pandemic deepen?
  • Will the Riksbank’s recently launched corporate bond purchase programme increase real estate companies’ liquidity and reduce sector risk in the bond markets and on banks’ balance sheets?

Day 1


Credit quality outlook and key risks for the real estate sector post-Covid-19
Agenda highlights:

Guest Speakers

Anna Breman
Deputy Governor

Guest Speaker

Riksbank

Guest Speaker

Riksbank

Deputy Governor
Anna Breman
Anders Elvinsson
Head of Valuation & Strategic Advisory Sweden

Guest Speaker

Cushman & Wakefield

Guest Speaker

Cushman & Wakefield

Head of Valuation & Strategic Advisory Sweden
Anders Elvinsson

Moody's Speakers

Maria Gillholm
Vice President – Senior Credit Officer,
Corporate Finance Group

Moody's Investors Service

Moody's Investors Service

Corporate Finance Group
Vice President – Senior Credit Officer,
Maria Gillholm
Olivier Chemla
Vice President - Senior Analyst,
Sovereign Risk Group

Moody's Investors Service

Moody's Investors Service

Sovereign Risk Group
Vice President - Senior Analyst,
Olivier Chemla