Castellum AB (publ)

Good morning and welcome to this presentation of Castellum's Q4 report. My name is Kristoffer Strømbeck and I'm head of industrial relations here at Castellum. There will be a Q&A session in the end of the webcast. And if you'd like to ask a question by phone, please dial pound key five on the telephone keypad and ask your question. It's also possible to ask questions in the chat function in the website. Please keep the questions few and brief so that everyone has a chance to answer. Let's start. Joakim.

Good morning and welcome to our presentation of the Q4 and the full year results for 2024. It is a crisp and clear winter morning today but spring is around the corner and we can feel it. So, as we have stated before, we now have the financial strong position and are investing in attractive opportunities, both investing in the existing portfolio, product developments and acquisitions. The last days we have been quite active and announced a couple of important transactions and events. I will briefly comment on them now and then we will talk more about them during the presentation. Yesterday we announced that we are starting a new project in Stockholm. It's called Infinity and it's located in Hagastaden. We're developing a 20,000 square meters top class office space in one of the most vibrant areas of Stockholm. The total investment volume is about 1.7 billion SEK. And last week, we also announced that we have 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. As we have said many times before, we really like EMTA. The assets, the market, the management, and that the share price at which we are now, where we now have acquired shares and made a mandatory offer at 110.4 NOK, we think it's a really attractive investment. And we are also happy that we two days ago could announce that we have added one more credit rating and we are now rated by S&P and hence both Moody's and S&P. The new S&P rating of BBB flat is going to help us to achieve even better financing opportunities. Lastly, but quite importantly, the board has decided to propose a dividend of 2.48 kronor per share after two years of paused dividend when we have been focusing on strengthening our balance sheet. So a short reintroduction or an overview, especially for those of you that don't know us that well. Castellum is one of the largest listed property companies in the Nordic region. Property value as of last of December last year sums up to 155 billion SEK, including our share in Entra. Castellum has a yearly contract volume of approximately nine and a half billion SEC. Something about our property portfolio. Our portfolio is located in Nordic growth regions. Three quarters is located in Nordic metropolitan areas, meaning urban areas with at least 1 million people. And the remaining 26% is in growing regional cities in Sweden. The largest market measured by property value is Stockholm, followed by Gothenburg and Malmö. In addition, we have a decent portfolio, although I would say it would benefit from being larger in Copenhagen and in Helsinki, as well as a very well positioned and profitable portfolio in a number of Swedish regional cities, including Västerås, Örebro, Uppsala and Linköping, Norrköping. Our regional markets have proven very strong resilience and even rental growth during the downturn in 23 and 24. 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. And in all of these markets, we have boots on the ground. Customer activities such as leasing, tenant improvements, relationships, etc. are all done locally. And with the backbone of Castellum supporting the regional business with centralized functions, we can utilize economy of scale. This is our fully owned and consolidated portfolio. And as mentioned, we also have a 33.3 stake in Norwegian Entra. And our share of Entra's portfolio is approximately C20 billion. And Oslo would be our third largest market if we added our share of Entra to this property portfolio slide. We will come back to Entra later in this presentation. Castellum's tenants represent a cross-section of Nordic business and authorities and our exposure to individual tenants is low. Our 10 largest tenants represent less than 15% of our total contract volume and no tenant generate more than 2.5% of our rental income. The strong tenant base with many of our larger tenants being publicly funded, that is about 25% of our total contract volume, we have a very solid base. The largest tenant is the Swedish Police Authority with approximately 2.5% of our total contract value. The police is a tenant of ours in 12 different cities. As per the last of December, the remaining average length of our contract was 3.6 years. Looking at the full year result, it's a pretty stable one overall. Our net operating income is up 3.4% and the income from property management is up 10.2%. We will look deeper into these figures later in the presentation. Our net leasing is positive both for the full year 2024 and for the period. Also, this will be dug into in further detail further on. The changes in property value is actually positive for the first quarter since Q3 2022. However, it's still negative for the full year over approximately 1%. We have continued to sell non-strategic properties and have started to reallocate the proceeds into new investments in line with what we have said before. So, yes, we'll cover this in greater detail, but from a helicopter perspective, the total income increases, divestments affect income negatively. We have reduced property costs. We have reduced admin costs and also reduced our financing costs, mainly due to lower interest costs, but also lower debt volumes. Especially notable is the decrease in central administrative expenses, which is down 162 million. Summing up, we report income from property management, as I mentioned, more than 10% from last year. Over to you Jens.

Thank you Joakim. Good morning everyone. Looking at development of income during the period, the like-for-like portfolio income increased by CIEC 199 million, equivalent to 2.3%. The change in the like-for-like portfolio is mainly driven by indexation amounting to CIEC 408 million or 5.3%, though partially offset by higher vacancies of CIEC 122 million and discounts increasing by CIEC 28 million. The development in Q4 isolated is somewhat weaker, mainly relating to other rental income and early termination fees in the fourth quarter last year of 45 million. The direct property cost for the Light4Light portfolio decreased by SEK 54 million, explained by one of INQ for previous year as well. Electricity costs decreased by SEK 94 million, though mitigated by higher tariff bound costs for water and heating. Regardless, we keep a strong focus on our energy projects. Central administrative and property administrative costs reduced by SEK 176 million, of which SEK 143 million is explained by a write-off of previously capitalized projects in 2023. Excluding one of the administrative costs still decreased by SEK 33 million, corresponding to 4%, mainly due to reduced headcount and an ongoing cost review. Looking at renegotiations, prolongations, and net leasing, renegotiations corresponding to an annual rent of CEC 452 million were conducted during the period with an average negative change in rent of 1%. Additionally, contracts with an annual rent of 1.7 billion were extended during the period with no change in terms equivalent to 62% of total lease stock up for renegotiation. Looking at leasing activities, we are happy to return with positive net leasing on both an annual and quarterly basis, though the high termination rate continues to have a slight negative effect. Economic occupancy rate improves with 0.3 percentage points during the quarter and the positive change is mainly relating to started projects. Tenant quality is deemed very stable and outstanding receivables are low and decreasing compared to the same period last year. Bankruptcies also lower than last year, down from 57 million to around 40 million. However, somewhat increasing during the last quarter. We are also happy to dive into a very significant lease we signed in the fourth quarter with TV4. It's a 15-year lease for approximately 15,000 square meter and a total rental value of SEK 1 billion. We will invest approximately 300 million in the building. Completion of the property is scheduled for the autumn of 2026, after which it will be ready for occupancy. Today, Castellum has its own regional and head office in the property, but will be moving to new premises later this year to create room for TV4. In addition to TV4, we have also signed many other leases during the quarter, among others, including a 3,300 square meter lease in Helsinki, a 1,000 square meter lease in Stockholm at our central cluster on Torsgatan, and a 2,200 square meter lease in Malmö in Hylje. All three contracts have been signed with different parties that do not allow external communication of the tenant. All contracts signed on fair market terms. Jumping into our favorite slide about parental income and net leasing. Over the last five years, Castellum has delivered a positive net leasing of CEC 580 million. However, during the last two years, the number was negative with minus 54 million. Now, with lower interest rates and a strong return to office strategy among many companies, a positive shift might be on the way to some extent, supported by our leasing activities during the fourth quarter, but still too early to say with certainty. Income on the other hand is more stable and increasing over time, however, affected negatively by two years of divestments and a general slowdown in the economy. New projects are underway and will grow rental income over time. Joakim will tell you more on the topic of new projects later in the presentation. And then... Property values at a quick glance. During the period, Castellum has written down property values with approximately CEC 1.6 billion equivalent to 1.2%. Since the peak in 22, downward close to 23 billion, the value change during the year is mainly driven by lower cash flow expectations. During the fourth quarter, we have the first quarter with positive value change since the third quarter 22, where our projects have a solid positive value effect. We are also seeing significantly higher investment volumes in the Swedish real estate sector. Volume wise, the fourth quarter ended the year in a really strong manner and might be an indication of what to expect for this year. Office stood for 26% on investment volume, which is at the level that we haven't seen since 2016. Valuation yields up one bit since last year, more or less unchanged. In addition, our property sales continue to confirm our book values. Highlights from the financial side, loan-to-value now at 35.6%, down with almost 2% points during the year, despite the slight downward pressure of property values. ICR currently at 3.3 times, expected to be stable going forward. Average interest currently at 3.2%, down by 0.2 during the quarter. We expect average interest rates to be stable around 3.2 during 2025. FX heads on Entra have impacted financial net by approximately 19 million, a direct effect of the historically high interest rates differentiating between Norway and Sweden. Also in Q4, we've had one-off in the financial net relating to innovation of bonds, early closing of loans and rating fee of approximately 14 million. As Joakim previously mentioned, we are also very pleased to share that we have received a long-term credit rating of 333 stable outlook with standard and poor. This confirms Castellum's stable business model and strong financial position. The rating improves our position in the capital market and enables lower financial costs over time. Looking at debt maturities, we're proceeding with our focus on extending duration, now reaching an average debt maturity of 4.4 years. During the quarter, we have only refinanced one term loan of 3 billion on an eight-year tenor on competitive terms. Glad to report that we also have 80% of all term loans signed during the year has been green. Limited amount of unsecured funding expiring 2025, save for one large Euro bond of 500 million in March. Capital market is currently very strong and liquid. Price indications on the three-year domestic bond is currently slightly below 100 bps, five-year bond 125. Also roughly 26 billion in cash and unutilized credit facilities available at the end of the year. We have reduced the RCF volume during the quarter somewhat and expect to further cut it going forward when we achieve longer commitments from bond market and banks. During the quarter we successfully completed innovation of Kungsledens bonds. This is done to streamline the debt portfolio and reduce administrative work. All in all, a very good financial position for Castellum. Over to you Joachim.