Castellum Q2 2025 slides: Strategic investments amid declining income

Introduction & Market Context

Castellum AB (STO:CAST), one of the Nordic region’s leading listed property companies, presented its half-year 2025 results on July 15, revealing a strategic focus on acquisitions and refinancing despite declining income figures. The company, with a property portfolio valued at approximately SEK 159 billion, continues to navigate a challenging rental market, particularly in Stockholm’s office segment.

Following a difficult first quarter that saw an 8.43% stock price drop, Castellum’s shares have partially recovered, trading at 117.3 SEK as of July 14, up 0.43% from the previous close. The stock remains well below its 52-week high of 152.2 SEK but has maintained distance from its 52-week low of 95.9 SEK.

Quarterly Performance Highlights

Castellum’s financial performance for the first half of 2025 showed continued pressure on key metrics. Income decreased by 3.8% to SEK 4,789 million, while Net Operating Income (NOI) fell by 5.5% to SEK 1,572 million compared to the same period in 2024. Most notably, income from property management declined by 8.7% to SEK 2,222 million, indicating an accelerating negative trend from the 7.3% decrease reported in Q1.

As shown in the following summary of key financial figures:

The company also reported negative changes in property values of -0.9% (SEK -1,168 million) and negative net leasing of SEK -182 million. The economic occupancy rate stood at 90.3%, reflecting ongoing challenges in the rental market.

A closer examination of Castellum’s tenant base reveals a diversified portfolio with significant stability from public sector tenants, which account for 26% of contract value:

Strategic Initiatives

Despite the challenging market conditions, Castellum has maintained an active investment strategy. The company completed acquisitions of five properties in Uppsala, Örebro, and Linköping for a total of SEK 1.7 billion during the period, strengthening its position in regional cities that have shown greater resilience than metropolitan areas.

The regional distribution of investments demonstrates Castellum’s strategic focus:

A significant financial achievement during the quarter was the refinancing of approximately SEK 10 billion in secured debt, which the company expects will generate annual cost savings of SEK 20 million. This refinancing, along with other financial management initiatives, has helped reduce the average interest rate to 3.2% from 3.3% in Q1 2025.

The company’s debt maturity profile and financial position are illustrated below:

Castellum has also increased its strategic investment in Entra, Norway’s largest listed real estate company, acquiring additional shares worth NOK 783 million (approximately SEK 770 million) during the first half of 2025. This has increased Castellum’s shareholding to 37.0%, representing an indirect property investment of SEK 2.1 billion.

The Entra investment details are shown here:

Operational Challenges & Tenant Updates

The presentation addressed specific challenges with key tenants. AFRY plans to vacate Castellum’s property in Solna, Stockholm, covering 23,000 sq. m. with an annual rental value of SEK 93 million. The agreement runs until September 30, 2028, giving Castellum time to secure new tenants.

Regarding Northvolt, which was mentioned as a concern in the Q1 earnings call, Castellum reported that the bankruptcy administrator has paid SEK 21 million for premises still in use. The company expressed optimism about finding new customers due to strong market demand in Västerås.

The company’s financial ratios remain stable despite these challenges:

Forward-Looking Statements

Castellum’s key takeaways from the presentation acknowledged the challenging rental market, particularly for offices in Stockholm, while highlighting the resilience of regional cities. Management emphasized the company’s strong financial position, recent refinancing achievements, and strategic acquisitions as foundations for future growth.

The company continues to focus on sustainability, with 68% of property value now sustainability-certified and self-generated electricity accounting for 23% of usage. These initiatives support Castellum’s long-term goal of achieving net-zero emissions.

Looking ahead, Castellum has a pipeline of development projects, including logistics and office properties. The largest not-yet-started projects represent a total investment of SEK 2,600 million, while ongoing projects over SEK 50 million total SEK 1,236 million.

Market Reaction & Analyst Perspectives

Market reaction to Castellum’s half-year results will be closely watched, particularly given the stock’s volatility following the Q1 earnings call. The accelerating decline in property management income (-8.7% vs. -7.3% in Q1) may raise concerns, but the company’s proactive approach to refinancing and strategic acquisitions could provide offsetting positive factors.

Analysts are likely to focus on Castellum’s ability to address the negative net leasing trend and its strategy for the challenging Stockholm office market. The increased investment in Entra and focus on regional cities may be viewed as prudent diversification given current market conditions.

With a loan-to-value ratio of 36.7% (up from 35.3% in Q1) and an interest coverage ratio of 3.2, Castellum maintains financial flexibility to navigate the current environment while pursuing strategic opportunities. The company’s Moody’s rating of Baa2 and S&P rating of BBB, both with stable outlooks, further underscore its solid financial foundation despite operational headwinds.

Full presentation:

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