Castellum takes Kungsleden
Consolidation in Swedish real estate ramps up
A big theme of 2021 is consolidation in the real estate sector. Entra is still in play with Castellum and Balder holding large stakes. Sagax keeps increasing in Nyfosa. Corem bought Klövern. SBB bought Offentliga Hus. Amasten bought SSM. Stenhus bought Maxfastigheter. Trianon is about to swallow Signatur. I’m likely missing a couple off an extensive list.
The latest merger, and a real doozy, is Castellum making an offer for Kungsleden. This was both expected and unexpected by me. While the combination is completely logical from a mix perspective and to make use of scale, I would have thought that Castellum would buy Corem before any further consolidation. Seeing as I guessed that Castellum would take Klövern, I’m now zero for two in my guesses. Rutger Arnhult keeps confounding my expectations. That’s probably why he is where he is and why I am where I am.
My expectations were that newly merged Corem-Klövern would be taken out sometime in the latter parts of the year. This is now not likely to happen as quickly. The naive view would be that this is bearish for Corem stock, but this has not materialized as of yet at least. It also confirms my overall thesis: the consolidation push in the sector is outstandingly strong. Financing is the name of the game. And Corem still has the highest discount to NAV (an NAV which is likely to grow at a decent pace).
Additionally, the market has been very worried about the prospects of Klövern’s office developments, most significantly in NYC. This deal - which takes “bailing out” Corem off the table for at least another six months - is therefore incrementally bullish on those developments. It tells the market that Arnhult is not worried about them.
I keep missing out on direct exposure to the upcoming deals in this market consolidation, but from my view Corem is still sitting pretty here. The eventual merger with the now even larger Castellum remains overwhelmingly compelling from all sides.
With ZIRP, an insatiable bond market and population growth way above European averages for some time to come, the Swedish real estate sector will probably keep serving up opportunities in M&A. Stay tuned.