Castellum AB (publ)

Welcome to Castellum Q2 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 Joachim Schoberg and CFO Jens Andersen. Please go ahead.

together with... Good morning, everyone. This is Joakim Sjöberg. I'm here together with the CFO of Castellum, Jens Andersen. Happy to have you all here to listen to our Q2 report. And starting off with the first interesting figure is that we increased the rental income by a total of 12.6%, mainly due to indexations. in the rental agreements, but also due to the long and positive trend of net leasing and successful renegotiations. And also some completed projects that have been worked on for several years. We'll come back to that later. The net operating income increased by 10.5%, mainly due to indexations. And the income from property management decreases mainly due to higher interest rates and property costs. Of the total increasing costs, financial costs stands for some 60% and property costs about for the rest. Changes in property values is during the first half of this year around six and a half billion. But please let me remind you that Castellum started to adjust the yields already after the third quarter last year. We have already lowered the value of our portfolio with some 13 billion, and that is 8.5% since the top values last year. The bulk of the changes during this period was done in Q1 and continues during the second quarter. Castellum has a positive net leasing during this quarter, isolated, but since January it's decreasing, mostly due to some previously known vacancies in the first quarter, but more on that later. Overall demand remains strong with the same high level of newly signed contracts as in the previous period. We can see a slight decrease in occupancy rate, largely explained by sold properties in Stockholm, Marivik, and also the big sale that we completed to Axis in Lund. Properties that were almost fully left and therefore when they disappear from our occupancy rate calculation. will lower the the the rate and we have sold properties of about 3.4 billion during the first half of this year which we are very pleased with no need for further sales right now but by definition all assets are for sale if the price is right and the continued divestments of non-strategic assets will happen as communicated earlier. Most of you know this already but please let me just reiterate our business and geographic presence. The largest portfolios are in the Stockholm area and then we have the west and the Öresund area that together represent likely around 30% each. Stockholm is 50% roughly. And then we have, of course, our holdings in Copenhagen, Helsinki, and indirectly through Entra in Oslo. The strategy is to be a leading sustainable and Nordic property company, and that remains. We have completed the rights issue during this quarter. And with the observance of the equal rights of all shareholders and taking into account the Swedish stock market rules, this process did take a while. The issue was fully subscribed without using any of the guarantees and underwriting that we had. It added just over 10 billion SEK to the company. In the short term, the money has been used to repay maturing bonds and revolving credit facilities in banks. Through the rights issue, Castellum's financial position has strengthened, which clearly shows in the improved financial key figures, such as the loan-to-value ratio of 36.9%. which is a significant decrease since last quarter. And it's also strengthened our liquidity position and covers all bonds that matures over the next three years. This gives us a stability in troubled times and also creates opportunities to create value out of our project portfolio. I now hand over to Jens.

Hi, everyone. We report strong growth in income during the period, 9.8% for the like-for-like portfolio, largely due to indexation and a long trend of positive net leasing and successful renegotiation of contracts. Development properties are also a key driver thanks to completed projects such as the Swedish Police in Örebro Greenhouse in Helsingborg, E.ON in Malmö, among others, which gives a similar effect on the cost side, however, to a smaller degree due to high surplus ratio in new built effective green buildings. Total increase in cost is still high, 21.9% for the light-to-light portfolio, although lower than during the first quarter that summed up to 25% in the light-to-light portfolio. Cost control will be our key focus throughout the remainder of the year and during the coming budget process for 2024. Total increasing costs for light-to-light portfolio for the first half of the year was 192 million, of which 103 million relates to electricity, 30 million relates to property tax, and an additional 30 million comes from increased heating expenses. Please note a one-off administrative cost of 63 million that is attributable to system development that has now been reclassified. Next slide. As you all know, we have a very strong tenant base with many of our larger customers being publicly funded operations or listed companies. A good portion, 25% of our rental income is derived from publicly funded operations. Swedish Police is now also our largest tenant, followed by AFRI and ABB. Our 10 largest tenants stands for less than 15% of our total rental income, and we know tenant rent generating more than 2.1%. Our customers demonstrate a strong ability to pay rent even after factoring in indexation.