Castellum AB (publ)

Welcome to Castellum Q1 Report 2023. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star 5 on their telephone keypad. Now I will hand the conference over to CEO Hossein Shouberg and CFO Jens Andersen. Please go ahead.

Good morning everyone. This is Joakim Sjöberg, CEO of Castellum. I'm glad to have so many of you participating here in this Q1 report. This has been somewhat of a slow quarter and we see increased income thanks to our indexed agreements. Our tenants show good ability to pay and we have small losses during the quarter. We have increased cost of approximately 140 million SEK, of which 70% are directly linked to secured electricity prices this quarter. And those secured prices will decrease in Q2. We have also some slight increases in property taxes during the quarter. The net operating income, and we are writing down the values by approximately 3.9% due to the increased yield requirements. So Castellum in brief, you all know pretty much everything there is to know about Castellum. But we are one of the largest listed commercial property companies in the Nordics. We are present in growth cities in Sweden and in the very dynamic regions of Copenhagen and Helsinki. And through our Nordic strategy, we are also represented in Norway by Entra, mainly in the Oslo region. And as you can see, as of this quarter, we have a property value of approximately 174 billion, including Entra. That comprises 741 properties. And we have a yearly contract value of approximately 10 billion SEK. That's the amount of rent that we can invoice as per now. So Castellan's tenants, it represents a fairly good cross-section of Swedish business life and the public sector. We have an average lease duration of 3.9 years compared to 3.6 years for the same quarter last year. We have, as you can see, a good mix of customers and the property categories give all an extra stability in these uncertain times. So I think I hand over to Jens.

Good morning, everyone. As you see on the slide, we've had a long positive trend of net leasing however in q1 negative with minus 52 million and should be compared with the net leasing in q1 22 that was positive 25 million however continued stable demand from our tenants contracts take somewhat longer to to negotiate Continued negative effects from the ongoing war. Higher interest rates can be expected, but do not show clearly in the rolling 12-month figures. Too early to draw long-term conclusions. And important to mention is that the 12-month rolling figure is positive and 84 million. No clear trend, but tenants take smaller space, broader combination where some expand and other decrease space. Bankruptcies are up 19 million for the first quarter compared with 8 million the full year 2022. Higher numbers cannot be ruled out in the future, but all natural in a weaker economy. Numbers are partially explained by a few larger contracts being terminated, mostly in Stockholm, and the increasing bankruptcies. Also, our communicated strategy to reduce projects will have a negative effect over time. Looking at the key figures, Currently loan-to-value is above our new financial policy of 40%, although well below our creditors requirements. The suggested rights issue will strengthen the loan-to-value and ICR. Higher interest rates and expiring interest derivatives will, on the other hand, put continued downward pressure. Good appetite from the banks, but we need to preserve our unencumbered asset base currently at 51%. we will need to keep it about 45% long-term in order to keep a specially mooded happy. Loan modules from the banks continue to be relatively stable during the first quarter of 2023. 56% of our loan portfolio is secured with swap derivatives or fixed contracts with a duration of at least one year. Debt capital markets still relatively liquid with high spread. even though some real estate names have been able to issue below average spreads. However, we still favor bank financing for the time being. Looking at our largest ongoing projects, they will add a lot of rental income during the year, and they will also add a lot of duration to our work. The 12 largest projects, all above 100 million, have an occupancy rate of 75%. Key tenants in the four largest projects, Swedish Police, an animal hospital, North Vault and National Court Administration in Jönköping, all four are 100% pre-leased. Castellan's total investment volume for ongoing major projects amounts to approximately 3.6 billion, of which approximately 1.6 billion remains to be invested. We have completed two of our largest projects, Sju Skärman, Eons Headquarter, and God Svinkan National Courts Administration in Malmö during the first quarter with an annual rental value of approximately 170 million SEK. Another five larger ongoing projects will be completed during 2023 and will generate another approximately 110 million, excluding Jötland 9, which have been sold but not yet transferred to the new owner. Total investment budget 2023 is 4.6 billion, including capex, and the average lease term is above 11 years in these ongoing projects.