March 23, 2022 – Earlier this week EPRA published it’s 2022 Best Reporting Practices guidelines, which (finally) include best practice guidelines on how to report LTV.
EPRA’s guidelines are almost identical to Viceroy’s initial LTV analysis, for which we were ridiculed by SBB, the local press, and the entirety of the Nordic real-estate analysts who cover SBB. The legitimacy of EPRA’s best practice reporting cannot be questioned: SBB and (presumably) the sell-side are all members of EPRA and have (perhaps unknowingly) contributed to the establishment of this best practice guideline.
Viceroy reiterate that SBB’s LTV is massively inflated by the exclusion of hybrid securities and preference shares in its numerator calculation.
A further investigation also shows SBB uses its Total Assets instead of NAV as its LTV denominator and excludes payables in the LTV numerator. The LTV is once again jacked by the double counting of cash, and the inclusion of goodwill.
For any other real estate investment company, the ramifications of adjusting reported LTV are mild at-worst. For SBB, EPRA makes an example of how management teams give investors a false sense of security by “hacking” their LTV.