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Introduction & Market Context
Castellum AB (STO:CAST) presented its Q3 2025 interim report on October 23, revealing a challenging quarter marked by declining income and property value write-downs. The company’s stock fell 2.5% to SEK 113.65 following the presentation, approaching its 52-week low of SEK 95.9, as investors reacted to the financial pressures facing the Nordic property giant.
The presentation highlighted Castellum’s strategic pivot to a "back to basics" approach, focusing on profitability amid a challenging real estate market. As one of the leading property companies in the Nordic region with approximately SEK 159 billion in property value, Castellum is emphasizing core fundamentals rather than expansion.
Executive Summary
Castellum reported a 2.8% year-over-year decline in income to SEK 7,196 million for January-September 2025, with net operating income (NOI) falling 4.4% to SEK 4,908 million. The company recorded negative net leasing of SEK 166 million and property value write-downs of SEK 1,400 million, representing a 1.0% decrease in property values.
Despite these challenges, Castellum maintained a stable economic occupancy rate of 90.0% and reduced its average interest rate to 3.1% from 3.2% in the previous quarter. The company also highlighted its sustainability performance, with 7% improvement in energy efficiency and 69% of property value being sustainability-certified.
As shown in the following summary of key financial metrics:
Quarterly Performance Highlights
Castellum’s operating income remained flat in like-for-like properties compared to the same period last year, while development properties and coworking spaces saw slight declines. Property costs in the like-for-like portfolio increased by 2.5%, contributing to the overall pressure on net operating income.
The company’s leasing activities showed mixed results, with renegotiations covering SEK 197 million achieving an average rent increase of 1.6%. However, new leasing of SEK 532 million was outpaced by terminations of SEK 698 million, resulting in negative net leasing for the period.
The following slide illustrates the development in operating income across different segments:
Property values were impacted by several factors, including unrealized value changes of SEK -1,412 million and negative currency translation effects of SEK 463 million. These declines were partially offset by acquisitions of SEK 2,031 million and investments in existing properties of SEK 2,085 million.
The changes in property values are detailed in this breakdown:
Detailed Financial Analysis
Castellum’s financial position remains relatively stable despite the challenging market conditions. The loan-to-value (LTV) ratio increased slightly to 36.5% from 35.6% in Q4 2024, while the interest coverage ratio (ICR) decreased marginally to 3.2 from 3.3.
The company has maintained its credit ratings with Moody’s (Baa2 stable outlook) and S&P (BBB stable outlook), and reports having SEK 23.0 billion in cash and unutilized credit facilities. The average debt maturity extended to 4.6 years from 4.4 years previously.
The debt maturity profile shows a well-distributed schedule, as illustrated in the following chart:
Key financial ratios compared to the previous period demonstrate Castellum’s financial stability:
Strategic Initiatives
Castellum’s presentation emphasized its "back to basics" strategy, focusing on profitability with a return on equity (ROE) target of 10%. The company is prioritizing owning the right commercial properties in the right locations, strategic property transactions, and an intensive focus on leasing activities.
Despite market challenges, Castellum continued its investment program with total investments of SEK 2,085 million in existing properties and acquisitions of SEK 2,031 million, including shares in Entra worth SEK 770 million. Property sales amounted to SEK 618 million, resulting in net investments of SEK 3,498 million for the January-September period.
The regional breakdown of investments shows Castellum’s strategic focus areas:
Sustainability remains a core focus for Castellum, with notable progress in several key areas:
Forward-Looking Statements
Looking ahead, Castellum appears focused on improving profitability through its "back to basics" approach rather than pursuing aggressive expansion. The company’s strategy emphasizes leasing activities to address the negative net leasing trend and maintaining its position in prime commercial locations across the Nordic region.
CEO Paul Alcén emphasized this shift during the earnings call, stating, "Castellum needs to become more profitable," and highlighting the company’s strategic pivot "back to basics... instead of yield compression, it’s leasing."
The Year-end report for 2025 is scheduled for February 18, 2026, which will provide further insights into whether Castellum’s strategic adjustments are yielding the desired improvements in financial performance.
While the presentation maintains an optimistic tone about the company’s strategic direction, investors appear concerned about the declining income and property values, as reflected in the 2.5% stock price drop following the presentation. With the stock trading closer to its 52-week low than its high of SEK 140.1, market sentiment suggests caution regarding Castellum’s near-term prospects despite its solid financial foundation and strategic refocus.
Full presentation:
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