Balder Stops Buying Buildings and Starts Buying Itself

SEK 700m of buybacks in one quarter, a 13x leverage ratio management refuses to rush, and a Eurobond market it is content to wait out

BALD-B.ST · Earnings Call · 2026-10-23

The arithmetic of a 50% discount replaces the acquisition pipeline

For most of the last decade, Balder's story was told through the size of its property book. This quarter the property book barely moved — SEK 246 billion of mostly residential and commercial assets, 95% occupancy, net debt to total assets of 50.2% — and the plot moved somewhere else entirely: into the share register. The company repurchased roughly 13 million shares for SEK 700 million in the quarter, a run rate of about SEK 2.8 billion, or 5% of the share count. Asked by SEB's Stefan Bulow how management settled on that pace, CEO Sharam Rahi gave an answer that is really a capital-allocation doctrine in one sentence: “if we are pretty much zero net buyers in the market, you will end up with something around that number” — Sharam Rahi, CEO · 2026-10-23. That is free cash flow, minus small development spend, converted into equity retirement. What makes it a genuine change of regime rather than a tactical trade is what it displaces. The same CEO, pressed on whether the company would initiate new property acquisitions at today's share price, was blunt: “the relative attractiveness of the share buybacks is too high” — Sharam Rahi, CEO · 2026-10-23. Later he quantified the pivot himself, noting the comparison was very different when the share price was around 65 — acquisitions that once beat the buyback no longer do. Management guided the market to expect, at most, very small bolt-ons on a net basis. This is not a surprise in direction — analysts have probed buybacks-versus-deleveraging for at least two quarters — but it is a surprise in degree. In July, the IR line was that “it's always a comparison of where the returns are greatest, we will be rational there” — Jonas Erikson, IR or Investor Relations · 2026-07-14. Today that rationality has a single answer, and it is the company's own stock.

Leverage: a target that management has quietly decided to walk to, not run to

The awkward part of the buyback story is that Balder's own preferred metric is offside. Rolling twelve-month net debt to EBITDA is 13x against a self-imposed 11x target, even after a 0.7x sequential improvement driven mostly by FX and the annualisation of prior acquisitions. Robert Phillips of Green Street asked the obvious question: how do you balance continued buybacks against getting leverage back to target? The answer effectively demotes the target. The binding constraints, management argued, are the S&P measures tied to the current triple B rating — and those are comfortably in line. The 11x is a "directional statement", and closing it “is not gonna require us to take active actions with the balance sheet” — Sharam Rahi, CEO · 2026-10-23. Ewa Wassberg added the operational mechanics: net debt will not fall in absolute amounts; EBITDA is supposed to do the work, gradually, year by year. Read that alongside the buybacks and the conclusion is unavoidable: this is a company deliberately choosing per-share compounding over balance-sheet optics, and it is relaxed about it. "We are not particularly stressed about that," the CFO said. The convertible bond was flagged as a further, if conditional, de-gearing help if the stock stays above its strike. The cost side is the other half of that trade. Having spent last quarter admitting it could not be "particularly happy" with central cost growth, Balder has now escalated from regret to programme. It has asked management to re-evaluate everything, is relocating the Norwegian headquarters from Oslo to Trondheim, and told the market that central administration expenses should decline in absolute terms — while pointedly declining to give clear guidance on quantum.

We are not content with the efficiency level that we have. So, let's look everywhere we can look to find efficiency improvements... The direction is down, and I think that is the clear message. And we do not have a sort of finalized list yet of exactly what components will make that happen.
Sharam Rahi, CEO · 2026-10-23

That is a promise with a deliberately soft edge — the same shape as the leverage commitment. Both are directionally credible, neither is numerically binding.

The financing story nobody wanted to talk about last year

The quarter's highest-momentum company theme was not property at all. It was the Eurobond market, and the reason is mechanical: Balder has EUR 1 billion of bonds maturing in January 2027, issued in something close to a zero-rate world. Management's message on refinancing was notably unhurried. Spreads in the five-year euro space have widened 40-50 basis points from the low, and “during a time like that, we have no problem with sitting on our hands for a few quarters” — Sharam Rahi, CEO · 2026-10-23 — a luxury afforded by SEK 25 billion of liquidity held deliberately elevated, and by bank funding that can be substituted at the margin. Deposits into the other side of the ledger: a SEK 500 million green bond placed at the tightest spread since 2021, and bond funding currently cheaper than bank funding on a like-for-like maturity basis. The hedging nuance is worth watching. Balder has repeatedly used volatility to buy optionality — extendable swaps at favourable rates — and management conceded that if those opportunities stop, it becomes a modest headwind versus normal hedging. The swap book is only 20-25% of interest-rate hedging, most of the risk sitting in the bond market, so it is a margin item rather than a thesis item. But the language — "so far so good... we have no idea how that would look a month from now" — is the least confident note in an otherwise controlled call.

What is no longer being discussed

Two silences matter. First, the distribution of Norion dominated the prior quarter's narrative as the distorting event in the comparatives. Now it appears only as an adjustment line: profit from property management fell 2%, but rose 11% once Norion is stripped out. The overhang is gone, and with it the excuse. What remains is a like-for-like rental growth of just 1.2% and occupancy slipping from 96% to 95% on office softness — against a July call where management had detected a "clear pickup in interest" in smaller offices and cautioned “We see the trend is positive but that's all we see” — Sharam Rahi, CEO · 2026-07-14. That trend has not yet shown up in the occupancy number. Second, the asset-sale question has flipped from hypothetical to live. In July, on the Castellum comparison, the answer was “I wouldn't rule anything out... we don't have any sort of active plans of going out selling properties” — Jonas Erikson, IR or Investor Relations · 2026-07-14. This week the same analyst circle returned, and management went further on proceeds: “if we were to be net sellers, I would assume that we would use that for share buybacks” — Sharam Rahi, CEO · 2026-10-23. The freshest addition is the Entra stake — a board matter, but with a stated ambition: “we are pretty eager to extract shareholder value from our Entra holding” — Sharam Rahi, CEO · 2026-10-23. A Nordic peer, Castellum, has already shown the template of selling assets and buying back stock. The confluence is real: profit from property management sat among the market's highest-momentum themes this quarter, echoed by listed Nordic peers, and funding cost is now a shared European obsession. Balder's differentiated wrinkle is that it is monetising that environment through its own equity rather than its asset base. The company that spent a decade proving it could buy buildings cheaply is now arguing the cheapest asset on the tape is its own SEK 97 net asset value per share — at a price that implicitly discounts it hard. Whether the market rewards a 13x leverage ratio carried alongside a 5% annual shrink in the share count is the only question left.