Castellum Q1 2025 slides: Income declines amid strategic Entra investment push

Introduction & Market Context

Castellum AB (STO:CAST), a leading Nordic property company, presented its Q1 2025 interim results on May 6, revealing continued challenges in a property market still facing global economic uncertainty. The company’s stock closed at 116.3 SEK on May 5, down 0.34% and significantly below its 52-week high of 152.2 SEK, reflecting ongoing investor caution toward the Nordic real estate sector.

The presentation highlighted Castellum’s substantial Nordic footprint with a property portfolio valued at SEK 155 billion, including holdings in associated companies like Entra. With 5.3 million square meters of lettable area generating SEK 9.3 billion in yearly contracted rent, Castellum maintains its position as one of the region’s dominant property players despite current market headwinds.

As shown in the following overview of Castellum’s scale and regional presence:

Quarterly Performance Highlights

Castellum reported declining financial metrics for Q1 2025, with income decreasing by 2.6% to SEK 2,386 million and net operating income (NOI) falling by 2.8% to SEK 1,572 million compared to the same period last year. Income from property management decreased more substantially, down 7.3% to SEK 1,064 million, primarily due to higher interest expenses and increased costs of foreign exchange hedging.

The company’s property values saw a modest decline of 0.3% (SEK -368 million), while net leasing turned negative at SEK -184 million, with new leases of SEK 137 million unable to offset terminations of SEK 321 million. The economic occupancy rate stood at 90.6%, reflecting ongoing vacancy challenges in certain markets.

The following summary highlights key financial metrics for the quarter:

Rental activity showed mixed results, with renegotiations achieving an average 4% increase in rent on contracts worth SEK 73 million, while prolongations of SEK 447 million were extended with unchanged terms. However, the negative net leasing figure represents a concerning trend that management will need to address.

The following chart illustrates the longer-term trend in rental income and net leasing:

Changes in property values were influenced by several factors, with new constructions and renovations adding SEK 498 million, while divestments reduced values by SEK 177 million. Unrealized changes in value contributed negatively (SEK -351 million), and currency translation effects further reduced values by SEK 680 million.

This waterfall chart breaks down the various components affecting property values:

Strategic Initiatives

A central element of Castellum’s strategy is its increased investment in Entra, Norway’s largest listed real estate company. During Q1, Castellum acquired additional shares for NOK 383 million at an average price of NOK 115.5, increasing its ownership from 33.3% to 35.2%. This triggered a mandatory offer to acquire the remaining shares, signaling Castellum’s commitment to expanding its Norwegian presence.

Entra’s portfolio, valued at NOK 61 billion with 77% concentrated in Oslo, offers Castellum exposure to high-quality office and public sector properties with strong tenant profiles – 51% of Entra’s rental income comes from public sector tenants, with high occupancy (93.8%) and long average lease terms (6.2 years).

The following slide details Castellum’s strategic investment in Entra:

Sustainability remains a core focus, with Castellum updating its climate target to achieve net-zero emissions across its value chain by 2040. The company reported a 5% improvement in energy efficiency in its like-for-like portfolio over the last twelve months, with 67% of property value now sustainability-certified and 22% of electricity self-generated.

The following highlights Castellum’s sustainability performance:

Financial Position

Despite operational challenges, Castellum maintains a solid financial foundation. The company’s loan-to-value (LTV) ratio improved slightly to 35.3% (from 35.6% in Q4 2024), while the interest coverage ratio (ICR) remained strong at 3.2 times (versus 3.3 in Q4). The average effective interest rate increased marginally to 3.3% (from 3.2%), with an average debt maturity of 4.6 years and fixed interest rate term of 3.6 years.

Castellum’s debt maturity structure shows a well-balanced profile with SEK 22.3 billion in cash and unutilized credit facilities providing substantial liquidity. The company maintains investment-grade credit ratings from both Moody’s (Baa3 with positive outlook) and S&P (BBB with stable outlook).

The following chart illustrates Castellum’s debt maturity structure:

Investment activity remained positive with net investments of SEK 358 million during Q1, comprising SEK 498 million in development projects, SEK 19 million in acquisitions, offset by property sales of SEK 159 million. Additionally, Castellum invested SEK 400 million in Entra shares, indirectly gaining exposure to properties worth SEK 1.1 billion.

The company’s investment and transaction activity is summarized below:

Forward-Looking Statements

Castellum acknowledged the challenging environment, noting "global uncertainty with risk of delayed recovery for the Nordic economies" and expressing disappointment with the quarter’s net leasing performance. However, management highlighted the continued resilience of regional cities compared to major metropolitan areas and emphasized the company’s strong financial position and "continued growth ambition."

Major development opportunities include Nordic Hub Säve (Gothenburg), a sustainable logistics and mobility hub; Noon (Gothenburg), located between Nordstan and Lilla Bommen; and Hagastaden (Stockholm), a health-focused science district. The Brunna Logistics Centre represents another significant project, with a planned SEK 229 million investment to develop 13,100 square meters of logistics space starting in Q3 2025.

These forward-looking statements align with CEO Joacim Sjöberg’s comments from the previous quarter, where he expressed confidence that "2025 will be a better year than 2024" and emphasized the company’s readiness for new investments. However, the continued decline in key financial metrics in Q1 suggests that this recovery may take longer than initially anticipated.

As Castellum navigates through 2025, investors will be watching closely to see if the company’s strategic investments and development pipeline can reverse the negative trends in income and leasing activity, while maintaining its strong financial foundation in an uncertain economic environment.

Full presentation:

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.