Earnings call transcript: Castellum AB sees stock decline amid Q1 2025 earnings call

Castellum AB, with a market capitalization of $5.2 billion, reported a decrease in income from property management during its Q1 2025 earnings call. Despite efforts to improve operational efficiency and a positive rent renegotiation outcome, the company’s financial performance did not meet market expectations, leading to an 8.43% drop in its stock price. According to InvestingPro analysis, the company currently appears fairly valued, with analysts expecting net income growth this year. The earnings per share (EPS) and revenue forecasts were not disclosed, but the financial results indicate a challenging quarter for the real estate giant.

Key Takeaways

• Income from property management decreased by 7.3%.
• Stock price fell by 8.43% following the earnings call.
• Net Operating Income (NOI) decreased by SEK 46 million.
• Castellum remains committed to net-zero emissions by 2040.
• The company is focusing on extending debt duration and increasing investment pace.

Company Performance

Castellum AB, one of the largest listed property companies in the Nordic region, faced a challenging Q1 2025. The income from property management fell by 7.3%, and the net operating income decreased by SEK 46 million. Despite a positive 4% change in rent renegotiations, the company’s overall performance was impacted by a cautious market sentiment, especially in metropolitan areas.

Financial Highlights

• Income from property management: Decreased by 7.3%
• Like-for-like portfolio income: Decreased by SEK 4 million (0.2%)
• Net Operating Income (NOI): Decreased by SEK 46 million
• Loan-to-value ratio: 35.3%
• Interest Coverage Ratio (ICR): 3.2 times
• Average interest rate: 3.3%

Market Reaction

Following the earnings call, Castellum’s stock price dropped by 8.43%, closing at 116.3 SEK. This decline places the stock closer to its 52-week low of 95.9 SEK. The market reaction reflects investor concerns over the company’s financial performance and the broader uncertainty in the real estate sector.

Outlook & Guidance

Looking ahead, Castellum plans to continue as a net investor, evaluating potential acquisitions and focusing on extending debt duration, currently at 4.6 years. The company also aims to increase its commercial paper volume to SEK 3 billion and refinance SEK 8-9 billion in secured debt. These strategic initiatives are part of Castellum’s effort to strengthen its financial position and capitalize on attractive investment opportunities.

Executive Commentary

Joachim, a company executive, expressed optimism about Castellum’s financial position, stating, "We have a strong financial position and have capacity to invest in attractive opportunities." He also emphasized the company’s commitment to enhancing its leasing organization, noting, "We are investing both in staff and in support system and artificial intelligence to make sure that we not only have a good leasing organization, but an excellent leasing organization."

Risks and Challenges

• Potential NOI reduction of SEK 100 million if Northvolt spaces are not re-leased.
• Negative net leasing of SEK 184 million, with SEK 68 million from Northvolt.
• Global trade uncertainty affecting market dynamics.
• Cautious sentiment in metropolitan areas impacting real estate transactions.
• The challenge of maintaining energy efficiency improvements.

Q&A

During the earnings call, analysts raised concerns about the Northvolt bankruptcy, which could lead to a significant reduction in NOI if the spaces are not re-leased. Management addressed these concerns by highlighting their investment in improving the leasing organization and capabilities.

Full transcript - Castellum AB (CAST) Q1 2025:

Christoph Ostwernbeck, Head of Investor Relations, Castellum: Good morning, and welcome to this presentation of Castellum’s Q1 report. My name is Christoph Ostwernbeck, Head of Investor Relations. There will be a Q and A session in the end of the webcast. Let’s start. Go ahead, Joachim.

Joachim, Senior Executive, Castellum: Thank you, Gustaf. Good morning, everyone, and welcome to this presentation of our Q1 results. As you are fully aware of the last months, the financial markets have once again been more volatile and following larger uncertainty with regards to global trade, The US tariffs and subsequent countermeasures from Chinese tariffs. It is difficult to predict how this will translate into the Nordic economies and more specifically into our tenants. But we are humble, also optimistic.

As you may have noticed, we are very active on the leasing market and have announced some significant contracts, more on that later. We have a strong financial position and have capacity to invest in attractive opportunities. So far, we have invested in our existing portfolio and increased the pace within project development, but also increased our position in Entra. During the quarter, we have announced that we are starting the null project in Hagastaden in Stockholm, where we are developing some 20,000 square meters top class office space in one of the most vibrant areas of Stockholm. During the quarter, we have also decided to start a logistics project in Bruna outside Stockholm with a total investment volume of $229,000,000.

After the end of the period, we have also announced an investment of 200,000,000 in Johan Sverdruping, coupled with a good twenty year lease with the hotel chain Skandik. In Johan Schapping, we will also invest more in Warkjet and have signed a 7,700 square meter contract with the Swedish police. And in Bothenburg, we have signed a lease agreement with Nitek Group.

: We

Joachim, Senior Executive, Castellum: also concluded the mandatory offer for Entra and have bought shares in the market and managed to increase our position at a very attractive price. During the first quarter, we printed a large SEK bond in the March. That’s SEK 4,000,000,000. Good timing and very good terms. And after the period, we have updated our climate target.

It has been validated by the science based targets initiative. More on that later. As usual, we have this short overview for those of you who do not know us that well. We are one of the largest listed property companies in the Nordic Region with a property value of billion, including our share in associated companies that is Entra and Halvorsen. We focus on three segments: Office, which is our largest segment Logistics, which includes warehouses and light industry and public sector properties.

The property portfolio is located in attractive growth regions in The Nordics. We have a yearly contract value of approximately SEK 9,300,000,000.0. We are a fully integrated company with local hands on presence where our assets are located. In all our four markets, we have boots on the ground. Customer activities such as leasing, tenant improvements, relationships, etcetera, are all done locally.

With the backbone of Castellum supporting regional business with centralized functions, we create synergies and utilize economy of scale. Over to our portfolio. It is located in the Nordic growth regions. Some 74% is located in Nor Nordic metropolitan areas, meaning urban areas with at least 1,000,000 people. And the remaining 26% is in growth regional growing regional cities in Sweden.

The largest market measured by property value is Stockholm followed by Gothenburg and Malmo. In addition, we have a decent portfolio in Copenhagen and Helsinki, as well as a very well positioned and profitable portfolios in a number of Swedish regional cities, including Westeros, Uppsala and Linkoping Nordshopping. Our regional markets have proven strong resilience and even rental growth during the downturn. We have a solid market position in our regional markets where we are number one, two or three in each of them. That makes us relevant for tenants and for the city’s councils.

This is our fully owned and consolidated portfolio. As mentioned, we have also a 35% stake in Norwegian Entra, and our share of Entra’s portfolio is approximately 20,000,000,000. And Oslo would be our third largest market if we added our share of Entra. We will come back to Entra later in this presentation. Castellan tenants that represents a cross section of Nordic business and authorities, and our exposure to individual tenants is very low.

Our 10 largest tenants represent less than 15% of our total contract value, with no tenant generating more than 22.6%. The strong tenant base with many of our tenants be publicly funded operations, 26, as I mentioned, of our total contract volume stems from public sector tenants. The largest tenant is the Swedish Police Authority with 2.6% of our contract value, and we have them as tenants in 12 different cities in our portfolio. The remaining average length of our contract is three point six years. Those of you with a sharp eye and a good memory have noticed that Northvolt is not longer on this list.

Reason is, of course, that Northvolt is in bankruptcy. We will comment more on Northvolt later in this presentation. The results compared to the same period last year is negatively affected by the fact that we have sold standing or yielding assets during last year as well as slightly higher vacancies. In addition, income from property management is negatively affected by higher financial costs. We will look into these figures in more detail later in the presentation.

A disappointing figure is the net leasing of minus 184,000,000. It is a large figure. A large part of it is the bankruptcy of Northvolt, and we are confident to be able to rent those premises to someone else, either through, someone actually acquiring the business or through the signing of a new lease. We have continued quite stable property value, although slightly negative on the margin. About half of the negative revision comes from the Northvolt properties.

Occupancy rate stands at 90.6%. We have made some investments of net $358,000,000, and we have continued to reallocate proceeds from divestments into new investments, in line with what we have said before. Short term, it is punishing our income growth, but long term, we are convinced that this asset rotation into more high quality projects and properties will be positive for Castello. As already mentioned, total income decreases and investment divestments affect income negatively. We have good cost control, reduced property costs, admin costs also reduced.

Summing up, we report income from property management minus 7.3%. Jens will cover this in greater detail. Over to you, Jens.

Jens, Financial Executive, Castellum: Thank you, Joachim, and good morning. Looking at development of income during the period, the like for like portfolio income decreased by SEK 4,000,000, equivalent to 0.2%. The change in the like for like portfolio is mainly driven by indexation, but offset by higher vacancies. The direct property cost for the like for like portfolio decreased by SEK 7,000,000, equivalent to 1.2%. Costs related to heating and snow removal are the key drivers.

Central administrative and property administrative costs increased by $2,000,000 equivalent to one percent. However, the increase in administrative costs are lower than salary indexation due to ongoing cost review. On an aggregate level, NOI decreased by $46,000,000 with divestments and vacancies as key drivers. Development properties add only $8,000,000 due to reduced project investments during last two years. Looking at renegotiations corresponding to an annual rent of $73,000,000 which translates to 9% of total lease stock up for renegotiation were conducted during the period with an average positive change in rent of 4%.

Additionally, contracts with an annual rent of SEK $447,000,000 were extended during the period with no change in terms, equivalent to 53% of total lease stock up from renegotiation. Looking at net leasing, we are starting the year with negative net leasing, and we are far from satisfied with the outcome. At the same time, it reflects the cautious sentiment in especially our metropolitan areas. Gross leasing remains in line with previous years, but we are impacted by more and more lease terminations and in addition, more bankruptcies mainly related to Northvolt. However, rental losses still at low levels and our outstanding receivables continues to be low.

The economic occupancy rate, as already mentioned by Joakim, at 90.6%, a decline of 1%. The decline is attributable to an underlying increase in vacancy corresponding to 0.6% as well as the effect of a general review of vacancy rents, which contributed an additional 0.4%. Looking at lease contracts during the quarter, no major lease contracts signed during the quarter. However, a good portion of medium sized bread and butter leases. In Linkoping, we have leased out to a gym operator, Friskies and Svetlis, two thousand square meters, a twelve year lease contract.

We are very pleased to have a gym in the building, where we have converted previously dark in all the mainly office areas. In Copenhagen, we have found a great tenant in Bips MobilePay, who have signed a 1,400 square meter office contract. In Stockholm, we have signed a new contract with Fremantle, fourteen hundred square meters, seven year contract. It’s a fit out for office. Interesting to know that they are a production company that, among others, produce TV shows for TV four, a tenant which we have rented out our current headquarter to very recently.

We have also signed a lease in Linkoping, Fourteen Hundred square meter, six year contracts expansion with existing tenants that are increasing with 500 square meters. We’ve also signed a 2,600 square meter contract for retail office and warehouse with All Office Nordic. And the list goes on and on. In Vestros, we’ve signed a public sector tenant called Swedish National Agency for Higher Vocational Education, five year lease, almost 1,900 square meters. Looking at rental income and net leasing.

As mentioned, negative net leasing during the period during or due to larger lease terminations and an increased number of bankruptcies. Income, on the other hand, is more stable and increases over time, however, affected negatively by two years of divestments and a general slowdown in the economy. Ongoing and new projects will grow rental income over time. In addition, we continue to scout for acquisition possibilities in the right locations. Joakim will tell you more on the topic of new projects later in the presentation.

Looking at property values. During the period, Castellum has written down property values with approximately $400,000,000 equivalent to 0.3 percent. The value changes is driven by the default on Norfolk and somewhat lower cash flow expectations in our valuations in the short term. The valuation yield is in all essence the same as the fourth quarter twenty twenty four. Our projects, in addition continue to show stable positive value add.

We also see continued higher investment volumes in Sweden real estate sector and the transaction volume in Sweden ended up at SEK $13,200,000,000 in the first quarter twenty twenty five compared to $6,400,000,000 the first quarter twenty twenty four, all according to NewsSec, where buyers and sellers’ price expectations continued to align easier. However, the ongoing trade war have created uncertainty in the market, which might impact investment volumes in the coming quarters. Segueing into the financial side of the business, loan to value now at 35.3, very low. ICR currently at 3.2 times and average interest rate currently at 3.3%. We expect the average interest rate to be stable around 3.2%, three point three % during 2025.

We see a potential to reduce the average credit margin in our loan portfolio this year by refinancing secured debt on better terms and increase the use of commercial papers. During the quarter, costs related to FX fixing of Entra have impacted financial net by approximately $32,000,000 a direct effect of historically high interest rate differential between Norway and Sweden. During the quarter, we’ve also received a BBB rating from Standard and Poor, which we’re very glad to have. In addition, we have a positive outlook from Moody’s one notch below. Looking at debt maturity, we are proceeding with our focus on extending duration now reaching an average debt maturity of four point six years, expected to reach closer to five years in the second quarter.

During the quarter, we have also issued green bonds with three different maturities totaling SEK4 billion. Average credit spread amount to 107 bps. The issue was the largest ever green real estate bond in the domestic market. In the second quarter, the bond market has been volatile and illiquid, but is gradually recovering. We expect to be active in the bond market going forward, but we see no need to rush back to the market when we have limited bond maturities in the short term and healthy liquidity.

We plan to increase the volume of commercial papers, hopefully reaching SEK 3,000,000,000 already in the second quarter to reduce funding costs further. We also expect to refinance $8 to $9,000,000,000 in secured debt during the second quarter, hopefully reaching fifteen, twenty bps lower credit margin. All in all, a very good financial position for Castellum. Over to you, Joakim.

Joachim, Senior Executive, Castellum: Thank you, Jens, and thanks for all the good work on the financing side. Castellum works towards clear sustainability targets in the short and the long term to contribute to a sustainable development. Energy efficiency was minus 5% like for like the rolling twelve months, and I’m very proud of the organization. We are actively engaged in reducing our climate impact through enhancing energy efficiency, one of the most important factors that we can contribute with. Last month, we announced our updated climate target.

This target means that Castellum commits to reach net zero greenhouse gas emissions across the value chain by 02/1940. It has been validated by the science based targets initiative and is based on the new standard for the construction and building industry. Looking at our investments, quality is one of our most important value drivers. Rotation of our portfolio is an integral part of our value creation. In Q1, we have continued to invest in projects, but we have also invested in Enta.

Nest investments are, as I mentioned earlier, $358,000,000 for this quarter. We have we invested SEK $517,000,000, almost everything in projects, including new constructions as well as extensions and renovations. Net investments only relates to investments in our consolidated property portfolio. That means it does not include investments in associated companies such as ENTRE, which we invested in, in Q1 and in Haldmorscheng in Gothenburg, which we invested in last year. In Q1, as mentioned, we acquired shares in Entra for approximately 400,000,000, which translates into an indirect property acquisition of SEK 1,100,000,000.0.

We intend to continue to be net investors going forward, and we are also evaluating acquisitions. On the investment side, projects represents the major part so far. We have eight larger ongoing projects and two to be started in 2025. ’1 of them is Sorbonne, which is the project that we call null , and another one is Oernes, which is logistics property in Bruna, North Of Stockholm. Larger projects for us means investments larger than million.

It’s a mix of metropolitan areas and regional cities. The average occupancy rate is 93% for the ongoing projects, with a total rental value of $215,000,000 and an average lease duration of approximately fourteen years. Just a few words on the two projects that you see on the pictures. The top one is Gulbeis Vaz, also known as Lila Baummen in Gothenburg. It’s a 4,500 square meter hotel, fully let to Skandik Hotels on a twenty year lease, and they will move in first quarter twenty twenty six.

And the lower one is Glau Dan in Kungsholmen in Stockholm. It’s a 3,900 square meter multi tenant office building. It’s in the western part of Kungsholmen, an attractive area. We started with 0% occupancy rate and now signed the first agreement, taking it to 11%. We’re quite confident that the leasing project leasing process will continue to improve, and the project is to be completed at the end of this year.

One of the strengths of Castellan is the large number of opportunities throughout our portfolio and the sum of a large number of small and medium sized development opportunities adding up to a large total. Having said that, we have a couple of major development opportunities where the largest one is in Gothenburg, where we bought an airport in 2018 and we where we have the opportunity to create a substantial logistics hub in an excellent location. In Gothenburg, we also have a very central office development opportunity. We call it Noon, and it’s situated between Nordstan and Lilaboomen. In Stockholm, we have a number of development opportunities in Hagerstaden, including null that we mentioned before, and in the central city around Tuskoten and in Slyktosomnrode just south of the city.

I mentioned I mentioned Bruna before. We have decided during q one to start a new construction of 13,100 square meter of modern logistics in Bruna, North Of Stockholm, next to our existing assets. The investment volume is $229,000,000, of which 163,000,000 remains to be invested. We have a positive view on the local market for logistics and warehouses. And since we already have 60,000 square meters in the area, we can manage the added volume easily.

I mentioned Entra before. In, in February, we announced that we had acquired more shares in Entra and thereby passing the one third threshold, which means an obligation to present the mandatory offer for the remaining shares. Acceptances in that mandatory bid, combined with shares that we acquired in the market during q one meant an increase of our shareholding from 33.3 to 35.2. And this was done at an average share price of NOK 115.5 or approximately 30% discount to Entra’s reported net asset value. We think acquiring shares at these levels is a good investment for us.

And passing the threshold and having concluded the mandatory bid also gives us better flexibility going forward. As mentioned, the acquisition of shares of almost 400,000,000 means that we indirectly acquired properties worth approximately 1,100,000,000.0. Entra has a high quality portfolio mainly in Oslo, a strong customer base with a strong lease and a large and attractive project portfolio. And we still believe that the company is well positioned for the future. Looking forward, we see global trade being affected by tariffs.

The American president keep surprising the market resulting in high volatility. The rental market is stable in our regional cities, however, more cautious in the more in in the metropolitan areas. Still, the fundamentals for the Nordic economies exist to pick up, but it’s more difficult to predict. After 2024 with positive net leasing, the q one figure is, as I mentioned, a disappointment. Not so much that it’s negative, that’s reflect that just reflects the cautious market, but the figure is simply too large.

At the same time, our rock solid financial position gives us ample room to maneuver if the market continues to deteriorate, and we can afford to ramp up our leasing organization. As we have said before, we are ready for new investments, both projects and acquisitions, because we have the financial position that we have. And we have increased the investment pace, including start of several development projects and the acquisition of shares in Enter. That’s it. Over to questions.

Christoph Ostwernbeck, Head of Investor Relations, Castellum: Yes. Thank you very much. So if you’d like to ask a question by phone, please dial 5 on your telephone keypad and ask your question. The first question comes from Lars Nollby.

Lars Norby, Analyst, SD: This is Lars Norby at SD. This is my turn?

: Yes. Please go ahead.

Lars Norby, Analyst, SD: Thank you, and good morning. Well, not surprisingly regarding that leasing. Out of the 184, how much is Northwell?

Jens, Financial Executive, Castellum: It’s 68,000,000.

Lars Norby, Analyst, SD: And if I recall correctly, I think at the end of Q4, you had a total contract value of $128,000,000 to Northvolt. Can you say something about the other contracts that have not been affected so far?

Joachim, Senior Executive, Castellum: You you mean the that there’s a we we don’t have any remaining Northvolt contracts reported.

Lars Norby, Analyst, SD: But you had a contract value of, I think, 128,000,000 at the end of Q4. And now you’re saying that the impact of Northvolt is 68,000,000 So what about the remaining volume?

Jens, Financial Executive, Castellum: Yes. It relates to investments on behalf of the tenant expect that to be paid back during the course of the contracts, in total $157,000,000 The $68,000,000 that we referred to relates to the positive effect of net leasing that we reported when we signed the contracts. So there is a difference between the two numbers.

Lars Norby, Analyst, SD: Okay. I’ll stop there. I guess there might be some follow-up question on that one. Let me just turn to two leases that you announced so far in the second quarter, the one with Nitek and the one with Swedish police. Just so I understand, mid April, you announced some 5,900 square meter.

In addition taking that contract to 9,288. And then you mentioned a rental value of 27,000,000. Is the 27,000,000 for the total area of 9.3 square meters.

Joachim, Senior Executive, Castellum: For the Nitek lease, bro.

Adam Shapton, Analyst, Green Street: Yeah. You

Joachim, Senior Executive, Castellum: Let me see if we can find that out for you during the call. I don’t I don’t have that number exactly in my in my head here.

Lars Norby, Analyst, SD: And since it is an extension of an existing space, what’s the net effect in terms of net leasing? That’s a follow-up on that one. And the same question We

Joachim, Senior Executive, Castellum: we have we have come back on that. I don’t unfortunately, I don’t have that number here.

Lars Norby, Analyst, SD: And then please, same question regarding the press release you put up on the May 5, the contract with Indian Charting, some 7,700 square meters with a total rental value of 23,000,000. But they are existing tenants with you, so the same question there was in the

Joachim, Senior Executive, Castellum: Not for yeah. They are an existing tenant, but not for those premises. So they are an existing tenant across the street, but this is a completely new lease whereof 2,200 square meters is to be constructed. So these, the 23,000,000 only relates to new space.

Lars Norby, Analyst, SD: Okay. Thank you. I’ll stop there. Those are my questions. Thank you.

: Thank

Christoph Ostwernbeck, Head of Investor Relations, Castellum: you, Lars. Next one is Yuan Wong.

: Hi, good morning. Thanks for taking my questions. Just a follow-up on Northvolt. What is exactly the time line of the bankruptcy? Have you already received the keys

Lars Norby, Analyst, SD: of

: the asset and how are you looking at reletting this?

Jens, Financial Executive, Castellum: I mean, there is absolute interest for the premises, but we we don’t do not know for for certain to which extent the current operation in those premises will be continued by someone acquiring the operation. We also see good interest in in the properties that they have left, but we do not have any new information to report. We hope to lease those premises that they have left as soon as possible.

: So how many premises have they exactly left then?

Joachim, Senior Executive, Castellum: Sorry? Come again?

: How how many how many promises have they exactly left, and how how many are still on the contract by then?

Jens, Financial Executive, Castellum: It it it’s a it’s it’s a bankruptcy, but they’ve left one of the properties where they had their head office, effect them 13. So it’s a a new built office in excellent location in the area, and we deem that it will be leased out again on reasonable terms. The remaining ones, they they are still using, but they are handled by by the bankruptcy estate.

: Okay. Clear. Thank you. And then on the remaining, 100,000,000 of, negative net letting, please provide a bit more color on these. Are these concentrated in any specific region or any specific asset class?

And also, where do you see opportunities to work on net letting over the coming year?

Joachim, Senior Executive, Castellum: They are fairly spread out. Some of them are larger. And just to give you some color, one of them is terminated for the reason of of of of a client relocating their business outside of Sweden, and and it has still a two year remaining contract term. So so so that’s that’s one end of the scale. And the other end of the scale is, of course, small businesses that that simply cannot cope with the uncertainty in the market.

So it it is a combination of of of a number of of terminations that that have accumulated and and but but they’re fairly spread out over our geography.

: And on the positive side, where do you see opportunities to improve net letting over the coming year?

Joachim, Senior Executive, Castellum: Across our geography, to be honest. Of course, the the the largest vacancies that we have is is in the Stockholm area, and that’s also the area where the the growth will pick up first in in in the Swedish market. We have a very strong development in in Copenhagen and the greater Copenhagen area. So so we figured that that if and when the uncertainty that affects business decisions is is is maybe not gone, but but at least something that we all can live with, then we assume that, that part of our markets will also pick up. And once again, Gothenburg is a very strong market.

It has been affected over the last couple of years with an increased volume, new projects that have entered the market. And and we see a slower pace in in new new office space in Gothenburg. And with the growth of the industry there, we believe that that is also, an area, of opportunity for us.

: Okay. Thank you. That’s it from my side.

Christoph Ostwernbeck, Head of Investor Relations, Castellum: Next one is Markus Henriksson of Begear. Please go ahead.

: Thank you. Good morning. I will also ask a question on Norfolk. First off, did you get full rent from Norfolk in Q1 twenty twenty five?

Jens, Financial Executive, Castellum: Yes. Yes, we did.

: All right. So what is the top line effect on this bankruptcy for Castellum in Q2 twenty twenty five?

Jens, Financial Executive, Castellum: I mean, it’s actually a difficult question to answer. But looking at the total effect going forward, I would say that we we are looking at a hundred million in reduced NOI if we do not lease out any of the space

Joachim, Senior Executive, Castellum: Due

Jens, Financial Executive, Castellum: to our accrued accounting, there are some parameters that will actually limit the impact for the remainder of the year. The total effect, I think, is around 45,000,000 for

: the remainder

Lars Norby, Analyst, SD: of the year. That’s a

: lot of a lot of different figures here from the previous questions, and and I I assume that it’s not super easy for you guys to give us a certain answer. But what is the immediate effect in Q2? That should be quite clear to answer. Then the full effect, I understand, could be complicated given if you lease out or not and other factors.

Jens, Financial Executive, Castellum: Yeah. But first, you have to take into consideration that we actually have received some money during the second quarter, ’9 million that will have to be netted out. We also have some investments that we actually will when looking at this during the second quarter, we will have a positive effect of around 50,000,000 in income relating to those accounting measures that will be concluded. I think that you have to rely on the total number of 128,000,000 for the full year and then with the an NY effect of a hundred. That is is the worst case scenario with no one paying any rent for the for a normalized full year.

For the second quarter, it’s it’s difficult to to give you a more clearer answer.

: That’s clear enough. Thank you for that. Then a bit on the terminations. I see there’s a quite significant one in Odessund. You highlighted you, Joachim, that one of your clients were reallocating outside Sweden.

So first off, is that in Odessund? Then second question, is it many small leases in Odessund or any larger ones you can highlight for us?

Joachim, Senior Executive, Castellum: The the the one in the Arresund area is a larger one. I don’t think that anyone has disclosed neither us nor the tenant. So so I I’m I’m not sure it’s appropriate to comment on that, but but that is one larger lease. And and it’s it’s it’s going to affect our top line in two years, but we report it as as net or negative leasing this quarter. The others are, as you mentioned, fairly spread out just across geography and across sectors.

: Alright. So so if I get you here that total negative net leasing, a lot of that will occur in two years’ time. That’s that’s what you’re

Joachim, Senior Executive, Castellum: saying? No. No. The the I I I don’t have the figures. I’m I’m looking at my colleagues here if if if we have that figure, how much that individual

Jens, Financial Executive, Castellum: termination is. I mean I mean, in in in the net leasing, bankruptcies hit us, more or less immediately, and and of the remainder, roughly 30,000,000, will will affect us eighteen months and and beyond that date. So

: Alright. That’s that’s clearer. Then a bit on vacancy rents, you updated them, and then it affected the vacancy rate by 40 basis points, I saw. I just wanted to see if there’s any markets or property segment that stand out when you did that review?

Jens, Financial Executive, Castellum: It actually relates to Kungslea then and the methodology. It took time for us to align, the method that we used for Castellum, and that was something that that we just had to do, and that was done this quarter.

: Very clear. Thank you. And then a follow-up here on occupancy rate and and net leasing. I understand that it’s not easy to give a clear answer. But if you just look at what net leasing you’ve had in the past, say, four quarters, and we just look at new leases and terminations, and we kind of exclude projects, we look at your management portfolio.

When do you think your occupancy rate will trough? So and then maybe also, what is the kind of timing effect on your reported terminations? You highlighted a bit before the Joachim, but is it more kind of back end? Or is it more hitting you here in 2025? So anything that can help us with when the occupancy rate will trough in Kastela?

Jens, Financial Executive, Castellum: I mean I I I would say that that, say, for the bankruptcy, the remainder, you take out the 30,000,000, the rest will start hitting us in the fourth quarter and beyond that date. Not that much will actually hit us for the first three quarters of the termination.

: Perfect. Yeah. Then also very quick on value changes, very small figures, minor figures here, but but you’ve had two breakeven quarters in a row previously. So are you seeing any trends among appraisers when when you discuss with them?

Joachim, Senior Executive, Castellum: I mean, we we first first of all, the the the transaction market was improving, and that gave the appraisers some more data points. And now it sort of is a more cautious attitude on the transaction market with with and and that will affect, of course, appraisers’ ability to to to find comparable transactions. But we are seeing a stabilized yield requirement, and and the the the the the adjustments that we made, of the property portfolio, value now is simply related to to the cash flow. So I I I I I don’t have a definitive answer on what all appraisers might see, but we are definitely ourselves seeing a stronger transaction market and and and thereby, most likely, more data points for the appraisers to to use.

: Very clear. Thank you for that. Those were my questions.

Christoph Ostwernbeck, Head of Investor Relations, Castellum: Thank you. Next one is Adam Shapton, Green Street. Please go ahead.

Adam Shapton, Analyst, Green Street: Good morning. Hope you can hear me okay. I want to ask another question on net leasing. But one comment you made in your closing remarks was about your ability to invest in the leasing organization.

: Could you just expand on that

Adam Shapton, Analyst, Green Street: a little bit? Are you saying that maybe you’re a bit underpowered? Do you need to have more capacity on your tenant underwriting? Obviously, you’ve got a lot of terminations and bankruptcies here. What exactly did you mean, and where where can you add more capabilities in that?

And then I I had that’s my first question. I have another one as well, but maybe just on that one first.

Joachim, Senior Executive, Castellum: Yep. No. I mean, traditionally, estate companies maybe have not excelled in the area of of productivity and and and sales force. And we are investing both in staff and in support system and and artificial intelligence and so forth to make sure that we not only have a good leasing organization, but an excellent leasing organization. This is something that will take time, and it’s also it it comes with a cost.

And and since we are the the stable company that we are with the with the with the a very healthy income despite what what we focus on now, we have capacity to to invest in that. So it is both an upgrade of of our systems, but it’s also upgrading our staff and the way we work simply.

Adam Shapton, Analyst, Green Street: Okay. That’s clear. Thank you. So it’s an ongoing

Joachim, Senior Executive, Castellum: It

Adam Shapton, Analyst, Green Street: is. Process. Is. Then my second question thank thank you. My my second question was just on your you you explicitly want to be a net investor.

Obviously, null is sizable project. Can you say, when we in a year’s time, what do you think the sort of project table will look like? You’ve got a lot of completions in the remainder of 2025. Do you think your net investment will be more on launching new projects or more on the acquisition side? How how do you think that will look a year from there?

Joachim, Senior Executive, Castellum: I I think that we will have a stable development of our project portfolio. As as as you as you know, we slowed down the projects or or paused them quite rapidly end of of twenty three and beginning of twenty four, that is affecting us. It takes time to restart and to find contractors and and to start the leasing activities again. So we are ramping up our projects because we have a healthy return on those investments. But that sort of takes time, and it’s also, of course, market dependent.

So I would say that we are constantly approving investment requirements from from the organization. So that’s an ongoing and pretty steady business where you will see us announcing new projects at a pretty stable pace. When it comes to investments, we are looking at them. We we it we will not be sort of pushed into doing any business just because we have to do a deal, But there are opportunities, and we’d like to make sure that they are creating value for our shareholders, not only today, but also in the future. So that is more of a coincident if the acquisitions will outnumber in volume the projects or not, but we are looking at them.

Adam Shapton, Analyst, Green Street: Okay. Thank you.

Christoph Ostwernbeck, Head of Investor Relations, Castellum: So that was the last question for today. Thank you all for listening.

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