Publications

SBB humiliates shareholders with absurd and untrue announcements surrounding the success of its incompetent dealmakers. December 8, 2022 – SBB announced it had sold a stake in its newly-formed EduCo to Brookfield on November 30,2022[1]. It then proceeded to defecate on a plate and present it to Ilija’s cult, who have lapped it up without question. This report will address the many inaccuracies and objective lies in SBB’s press release surrounding the transaction and its valuation. A copy of this report has also been submitted to the financial regulator. SBB’s inadequate and inaccurate disclosures are not aligned with required transparency principles. SBB claims that this disposal is between a 2.7% discount to a 2.7% premium to book, depending on earnouts. This is creative accounting. The actual transaction value of the Brookfield deal is SEK 40b and comprises SEK 44.9b of SBB’s assets. This represents an 11% discount to book value. As part of the transaction, SBB has provided SEK 14.5b in financing to EduCo at 3%, substantially below market rates (most recent USD private placement 2.6%-2.9% + EURIBOR). This is effectively vendor finance at below market rate to Brookfield to purchase a minority stake in its portfolio for a huge discount The only party who benefits from this SEK 14.5b loan is Brookfield. It is safe to say that the discount on the transaction would have been even greater (or should be considered greater), given the uncommercial terms SBB has provided this loan to Brookfield. The earnout conditions of this transaction hinge on EduCo’s ability to refinance the loan from SBB favorably, and its ability to deploy capex. We don’t believe this transaction will deliver substantial earn-outs when those earn-outs are related to SBB’s ability to spend money and borrow money. The Brookfield transaction will significantly impact SBB’s yield and its ability to continue paying dividends. Cash earnings capacity will fall below this year’s dividend rate. We note that SBB will continue having to borrow money to maintain its dividend. We also do not believe 9%+ rent adjustments are feasible, having observed market conditions to date. SBB’s LTV calculations are a clown show. We believe SBB’s LTV is closer to 66% Cash is double counted. It is counted against Net Debt (numerator) and included the “balance sheet total” (denominator) lines. This both decreases the numerator, and increases the denominator, both to SBB’s favor. SBB does not appear to account for Non-Controlling Interests (NCI) in its LTV calculation, massively inflating its balance sheet total. SBB does not appear to account for unrealized losses stemming from this transaction. The 11% semi-realized loss on the EduCo assets is not reflected in the SBB LTV. SBB excludes all hybrid securities and payables from its LTV calculation. These figures are now well established industry standards for inclusion in the LTV, with some minor caveats (see EPRA reporting guidelines). We also note that EduCo contains several properties in Norway which appear to be their largest kindergarten clients: Laeringsverkstedet and Trygge Barnehager AS. SBB will likely realize significant revaluation gains over the past 2 years despite the discount to book, as these properties appeared to have been revalued upwards >50% immediately after acquisition. We expect scrutiny from Norwegian regulators in a time where profiteering on social services and foreign ownership of state service facilities is under the magnifying glass. [1] https://corporate.sbbnorden.se/en/sbb-sells-a-49-stake-in-its-social-infrastructure-portfolio-for-public-education-to-brookfield-for-sek-9-2-billion-in-cash-with-an-additional-earn-out-of-up-to-sek-1-2-billion-in-cash/#_ftn8

June 22, 2022 – Viceroy’s deeper review into SBB’s financial accounts have presented material reconciliation challenges which our team, together with various expert consultants, cannot reconcile. This challenge stems from SBB’s consolidation of acquisitions, which we believe to be incorrect and unjustly inflating asset values. Viceroy have requested that SBB prove these reconciliations through correspondence and answer basic questions regarding non-cash entries in its statement of cash flows. SBB provided non-answer statements, including that its method of acquisition accounting is industry standard (it absolutely is not). SBB also acknowledged material error on its presentation of Contracted Future Rental Income, which was inflated by over 100% in 2020. Unsurprisingly, this was not picked up by auditors EY, who were also presented with this error, and have made no attempt to correct its audit opinion.

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.

March 22, 2022 – Perusal of SBB’s transactional counterparty financial accounts show significant contingent assets stemming from sales to SBB, which appear to be performance/event driven. SBB do not appear to recognize contingent liabilities to these transactional counterparties anywhere in its financial reports, creating a material audit risk of huge off-balance sheet liabilities from its aggressive acquisition strategy. Laeringsverkstedet parent Dibber AS's 2020 accounts show: NOK500m in unpaid consideration for the sale of 138 properties, with conditions expected to be met for the payment. A contingent consideration of NOK250m dependent on future events. Viceroy Research cannot immediately reconcile all these contingent liabilities to SBB in the same year. As usual, there is absolutely no transparency into SBB’s aggressive acquisitions, and their terms. Investors, auditors, and transaction stakeholders should be aware of contingent liabilities (or assets) and how SBB are treating these accounts. The existence of contingent liabilities has not even been disclosed by SBB, which is not a surprise given the insufferably opaque nature of SBB. We have contacted SBB’s auditors for questions surrounding the recognition, existence, and reversal of SBB undisclosed contingent liabilities.

Dear Esteemed Recipients, We refer to our preliminary correspondence dated March 1, 2022, in relation to the above matter. On March 4, 2022 Laeringsverkstedet (LV) published a letter to the Norwegian Ministry of Education aiming to clarify their sale-and-leaseback agreement with SBB. The letter clarifies the situation perfectly, confirming that things are far worse than we had projected in our original letter. According to LV it is Laeringsverkstedet’s owners that receive the D-share dividend. This is a moot point. It does not matter which entity in the LV Group receives consideration for sale of assets as they are wholly owned businesses and substantially all the business is the operation of kindergartens under the LV brand. LV’s response simply states that there will be no direct benefit from D shares at the operational level, which leaves it in an awkward position where it will either: Incur losses and be floated by (for example) loans from the parent company Generate profits floated by the Norwegian taxpayer in what is an undoubtedly lucrative but morally bankrupt loophole in Norway’s kindergarten financing. It is a logical fallacy to suggest that their NOK ~250m per year lease, on top of all the triple-net lease expenses one would occur as a landlord could be somehow comparable to the costs of just being a landlord (even when considering LV’s previous mortgage/debt expenses). The letter brings up the recent increases in construction costs for kindergartens. We are unsure why this is included as SBB is not building new kindergartens for LV. As Viceroy have previously stated we believe that SBB’s reason for this transaction is to record artificial one-time revaluations of these properties based on their inflated rent. Please do not hesitate to contact us if you have any questions regarding the below. Yours faithfully   Viceroy Research

Dear Mr. Novella Samhällsbyggnadsbolaget i Norden – Audit Risks We refer to Viceroy Research’s Samhällsbyggnadsbolaget i Norden AB (SBB) report dated February 21, 2022, and subsequent communications. We are contacting your due to concerns about audit risks at SBB. They involve: Auditor Risk: SBB shares its immediate audit partner with its largest shareholder, and CEO’s personal investment company for at least the past 3 years. We do not believe it is acceptable that the tender for one of Sweden’s largest Real Estate Investment Companies is optically tied to lucrative audit contracts of the CEO and majority shareholder’s private investment vehicles. These contracts have passed between audit partners simultaneously: Ingemar Rindstig and yourself. Valuation Risk: SBB’s appointed valuer, Newsec, through appointed partner, Ulrika Lindmark, appear to hide longstanding personal connections and concurrent contracts for the Batljan family. Both SBB’s and Ilija Baltjan’s investment vehicle’s registered business addresses are the Newsec Property Asset Management Office. Public facebook pages show Ms. Lindmark appears to be a personal friend of the Batjan family. Ms. Lindmark also signs off SBB’s valuation, and Newsec is responsible for the valuations of Ilija Batljan’s investment vehicles and companies where Mr Baltjan’s wife serves as CEO. Governance and internal control risk: SBB have provided strawman responses and relied on laughable technicalities to defer questions on nature of independence of its directors. We address SBB’s responses and highlight further independence and control risks to SBB’s audit. SBB & IB Invest appear to individually wholly own the property Vågskålen 24. This is concerning given Ingemar Rindstig was the auditor of both companies. Systemic M&A round-tripping and revenue round-tripping are coordinated to effectively float SBB's profits, balance sheet, and capital raises. Audit weakness have allowed the issues above to occur without investors being informed and without comment or objection by yourselves. We hope that this letter will more clearly lay out the audit issues at SBB such that you can fulfil your responsibilities to stakeholders. Yours faithfully, Viceroy Research Group

Dear Esteemed Recipients, Whistleblower Report – Laeringsverkstedet & Trygge Barnehager Viceroy Research has become aware of significant contract risks between Laeringsverkstedet (“LV”) and Trygge Barnehager (“TB”) (together “the Tenants”), and their new landlord: Samhallsbyggnadsbolaget i Norden AB (“SBB”). Together, the Tenants and SBB operate over 10% of Norway’s Kindergarten facilities. This letter, together with enclosed annexures, will provide background on tenant agreements and historical transactions between the Tenants and SBB, which we show has resulted in dangerously inflated rental pricing. This inflated rent is subsidized via dividends from SBB, which we believe are at risk of failure. Should this be the case, we believe the Tenants will default on their lease obligations and cause significant damage to the taxpayer, who will inevitably end up carrying these costs. We address you in your collective capacity in overseeing and subsidizing Norway’s Kindergarten system, and in your capacity to investigate perceived impropriety within private organizations in this system. Yours faithfully, Viceroy Research Group

February 23, 2022 – Earlier today, SBB published a blanket and uninformative response to Viceroy’s Report: Hard to Pronounce, Harder to Justify Value, dated February 21, 2022. Readers can access this report here: /publications/samhallsbyggnadsbolaget-research SBB’s response can be found below: https://corporate.sbbnorden.se/en/update-on-viceroy-report-on-samhallsbyggnadsbolaget-i-norden-ab-publ/ SBB have not provided any material response to Viceroy’s arguments, including SBB’s revenue and transactional round tripping. Instead, SBB have pushed half-baked strawman arguments and relied on verbose, subjective loopholes to try and clear their name. Like today’s earnings results: this response was completely uninformative for investors. The enclosed report contains point-by-point assessment of SBB's response to Viceroy Research. Viceroy will continue to track SBB, and plans to provide updates once we have digested earnings and other data provided to us over the last 2 days. -END-

Viceroy Research is short Samhällsbyggnadsbolaget (STO:SBB) and listed debt instruments. SBB is a debt-fueled rollup of rent-controlled assets. A review of the board of directors and management reveals several undisclosed, intimate relationships between the board members and/or with SBB: most directors appear to deal in property and/or invest heavily in competitors. SBB’s former head auditor & EY partner, Ingemar Rindstig, appears to have retired following an investigation by the Swedish Audit Inspectorate. SBB fails to disclose related party and buyer support aspects as well as purchase prices, buyers and sellers and which assets are being sold. Outside of rampant roll-ups (many of which are also undisclosed related party transactions), SBB’s self-serving insider dealing is used to justify their absurd asset valuations. Viceroy collated financial accounts of over 800 of SBB’s current and former subsidiaries. Our findings show stagnant revenues, booming operating costs, and immense fair value adjustments on SBB’s substantially rent-controlled property portfolio. SBB has “hacked” their LTV since ~2019 by issuing hybrid bonds to finance repayment of secured debt and bond loans. Since 2019, >80% (SEK18,960m) of Net Profit Before Tax has been attributable to unrealized gains: capital structure does not support cash-conversion from its earnings. Viceroy are of the opinion that SBB is un-investable. We do not think it is unreasonable that SBB’s financial statements are retracted to reflect findings in this report and believe there is significant downside potential to both the stocks and bonds as investors adapt to the inherent risk of SBB. EDIT: Nordea have insisted that we point out that they no longer write commissioned reports from SBB as of mid 2019. Nordea continue to act in advisory capacity in deals. EDIT: We have made a correction to Figure 17 upon discovery of an error. Despite this correction, this table is now completely immaterial to analysis post SBB's cashflow restatements.