Castellum AB (publ)

Good morning and welcome to this presentation of Castellum's Q2 report. My name is Christoffer Strandbeck, Head of Investor Relations. There will be a Q&A session in the end of the webcast. If you'd like to ask a question by phone, please dial pound key five on the telephone keypad and ask your question. Let's start. Please go ahead, Joakim.

Thank you, Kristoffer, and I say also good morning and welcome to this presentation of Castellum's Q2 results. In June, we announced our first larger acquisition for quite some time. We got the opportunity to acquire a high quality portfolio of assets in Uppsala, Örebro and Linköping with a total property value of approximately 1.7 billion SEK. We will look into this acquisition in more detail later on in the presentation, of course. In addition to the acquisition, we have continued to invest in our existing properties and have started a few more projects, as well as continued to increase our stake in Entra. We have a strong financial position and have the capacity to continue to invest in attractive opportunities. During the quarter, we have refinanced bank loans of 10 billion SEK continuing to increase our debt maturity and at the same time achieving a cost reduction through lower credit margins. On Friday this week, the 18th of July, we will hold an extra general meeting of shareholders in Stockholm, where our shareholders will decide upon a new board of directors. As usual, we have this short overview for those of you that do not know us that well. We're one of the largest listed properties companies in the Nordic region with a property value of approximately 159 billion, including our share in associated companies, which are Entra and Halvorsen. The focus on We focus on three segments, office, which is our largest segment, logistics, which include warehouses and light industry, and public sector properties. The property portfolio is located in attractive growth regions in the Nordics, and we have a yearly contract value of approximately 9.5 billion SEK. Castellum is a fully integrated company with local hands-on presence, where our assets are located. In all of our markets, we have boots on the ground and customer activities such as leasing, tenant improvement, relationships, et cetera, are all done locally. As can be seen from this slide, our property portfolio is located in Nordic growth regions. 74% is located in Nordic metropolitan areas. That means 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 in Copenhagen and Helsinki, as well as well positioned and profitable portfolios in a number of Swedish regional cities. These regional markets have proven strong resilience and even rental growth during the last times 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 the city's councils. This is our fully owned and consolidated portfolio. And as mentioned, we have also a 37% stake in Norwegian Entra. And our share of Entra's portfolio is approximately 23 billion NOK in value. Turning over to the most important part of our business, our tenants. The tenants represent the 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 value, and no tenant generate more than 2.8%. We have a strong tenant base with many of our larger tenants being publicly funded operations. 26% of Castellum's total contract value stems from public sector tenants. The largest tenant is the Swedish Police Authority with a contract value of 2.8%. of our token. The remaining average length of our contract is 3.6 years. I'd first like to apologize for a slide full of text, but we wanted to give you a short update on certain larger tenants that has caused some media attention. First, we have ABV. It's an important tenant to us in Västerås. Two years ago, they announced that they will build a new campus for their robotics business, that is industrial areas. We have, during the quarter, prolonged the robotics rental agreement to the end of 2027 and to mid-2028. But ADB has also given us a waiver of possession protection. The yearly rent for that part of the contract stock is approximately 0.6% of our turnover. Unfortunately, they have announced that they will be moving to another property. The yearly rent for that is less than 1% of our turnover. And the contract ends in last of September, 2028. So it gives us plenty of time to work on that vacancy. And finally, Northvolt, as you know, the bankruptcy hurt our net leasing in Q1. For clarity, we reported 100%. as negative net leasing in Q1, but we have been paid for part of the premises also for Q2. More importantly, we are optimistic about finding customers for the premises, and one way it could be solved is if the bankruptcy administrator finds a buyer for the entire Northvolt operation. So summarizing the first half year results compared to the same period last year is negatively affected by the fact that we have sold standing and yielding assets during last year, as well as being hurt by higher vacancies. In addition, income from property management is negatively affected by slightly higher financial costs. We will look into these figures in more detail in the presentation. The net leasing for the second quarter of this year is plus 2 million after a first quarter with a disappointing net leasing figure. So for the whole period this year is minus 182 as stated in the report. The occupancy rate stands as 90.3%. Our net investments of 2.8 billion back on track and we will of course continue to generate income from those investments going forward. The acquisition of 1.7 billion was finalized in the last of June and hence it will start to contribute the next quarter. Short term, the timing of our assets rotation has been punishing our income growth. But long term, we're convinced that this asset rotation into more high quality properties will be very positive for Castello. Just a quick overfly over the P&L, as mentioned, total income decreases and divestments has infected income negatively. Good cost control with a reduced property cost We got a good contribution from Entra this quarter, up more than one billion compared to last year. And summing up the report, we have property income of minus one, 8.7%. Jens will cover all this in greater detail. Over to you, Jens.

Good morning, everyone, and thanks Joakim. Looking at development of income, the like-for-like portfolio income increased by SEK 5 million, equivalent to 0.1%. The change in the like-for-like portfolio is mainly driven by indexation, but offset by high vacancies. The direct property cost for the like-for-like portfolio increased by SEK 14 million, equivalent to 1.2%. Direct property costs decreased at the beginning of the year due to the warm winter, but increased in the second quarter, primarily due to the higher rental losses, which increased by CX 17 million from CX 8 million to 25 million. However, overdue receivables still on low levels. Central administrative and property administrative costs increased by CX 3 million, equivalent to 1%. However, the increase in administrative costs are lower than salary indexation due to our ongoing cost review. On an aggregate level, NOI decreased by CIEC 185 million with divestments, increasing vacancies and one-off insurance claims recorded during second quarter previous year as key drivers. Please note that Quorum portfolio is still not in the income numbers. Looking at renegotiations, prolongations and net leasing, renegotiation corresponding to an annual rent of SEK 135 million were conducted during the period with an average positive change in rent of 1%. Limited investments on average to secure the renegotiated leases. Additionally, Contracts with an annual rent of CIEC 801 million were extended during the period with no change in terms equivalent to 53% of total lease stock up for renegotiation. We are of course not satisfied with the net leasing in the first quarter. Several larger terminations and the single large bankruptcy led to a net leasing result of minus 184 million for the first quarter. In the second quarter, net leasing has stabilized and amounts to CEC 2 million. We have signed several large leases in our projects and our gross leasing is at a high level. However, it suffers from a large portion terminations and more bankruptcies than average. The economic occupancy rate amounts to 90.3%, a decline of 1%. The decline is attributable to increasing vacancies corresponding to 0.6% and the general review of vacancy rents, which contributed in additional 0.4%. Several large leases has been signed during the second quarter. One of them in Gothenburg, we have leased out an entire building for 500 co-workers to Saab on a long lease. The building will be adapted for Saab's needs and completed in June 2026. The existing tenant will move to a smaller building also owned by Castellum and the total deal generates 17 million in positive net leasing. We also have some positive development in Copenhagen, existing tenant Clever that had a 12-month running lease, was renegotiated to a six-year contract with an increase of 500 square meters, total lease of 6,600 square meters, unchanged rent per square meter. In Jönköping, now Verket is fully leased out. The Swedish police authority expands and leases an additional 7,700 square meters on a six-year lease. Build start in fourth quarter, 25, and move in start of 2027. Yearly rent value, 23 million. Also in Gothenburg, our tenant, Nitech, after merger with Semcon, leases the entire building. Total area, 9,288 square meters. That will host 500 coworkers with a rental value of 27 million per year. The deal proves that we succeed when we stick to our clients and support them in their development and offer modern office in attractive locations. Moving over to rental income and net leasing, as mentioned, a slight positive net leasing due the quarter. income continues being more stable over time however affected negatively by two years of divestments and the general slowdown in the economy acquisitions ongoing and new projects will together grow rental income over time looking at property values during the period castellan has written down property values with approximately 1.15 billion, equivalent to minus 0.8%. The value chains is partly driven by the default north hold. The fact that Ofri will leave approximately 24,000 square meters in Solna and generally lower cash flow expectations in our valuations due to a downward pressure on rental levels and or increased TI's. to uphold these levels in some of our markets. The valuation yield is in all essence the same as the first quarter 2025 at 5.62%. Our projects continue to show positive value-add. The acquisitions of five properties in Uppsala, Örebro and Linköping from Quorum during the period was concluded at the discount market values which has been taken into account in the second quarter valuation. The investment volume in the Swedish real estate sector ended up to approximately 36 billion in the second quarter 25 compared with 31 billion in 2024, according to Kastman and Wakefield. Segwaying into the financial side of the business, as Joakim mentioned, we have refinanced approximately 10 billion of secured debt during the quarter with an annual cost saving of around 20 billion SEK, million SEK. The strict majority of the refinancing was on a five or 10 year tenor. Spreads on new bank loans are in the range between 120 to 140 bps. Financial market is very good right now. Current spreads in the domestic market for a three-year bond is at around 95 bps and for a five-year bond around 130 bps. European market indicates 10 bps wider. Spreads on the banking system generally somewhat lower than in the bond market, especially in the long run. We received a BA2 rating with stable outlook for Moody's during the quarter, and we also carry a BBB stable rating from S&P. We have increased the use of commercial papers during the quarter to reach almost 3 billion, up from around zero not too long ago. Current credit spreads of commercial papers is only 45 bps on a three-month tenor. relatively cheap money and good for our cash management. Average interest rate currently at 3.2%, down from 3.3% during the first quarter. We see a potential to further reduce the average interest rate in our debt portfolio in 2025 by refinancing loans and bonds on better terms. However, somewhat mitigated by some really, really well-priced swaps that will expire during the end of 25 and throughout 26. Loan-to-value now at 36.7%, somewhat increasing during the quarter due to acquisitions of the corn portfolio and pressure acquisitions. ICR currently stable at 3.3%. comfortable headroom against policy levels of three times. Average debt maturity currently at 4.6 years, including refinancing that was closed in the beginning of July. The average debt maturity is close to five years. Average fixed interest term is stable at 3.6 years. We have entered new interest rate swaps during the quarter, totaling 1.9 billion. During the quarter, costs related to FX fixing of ENFRA have impacted financial net by approximately 27 million, a direct effect of historically high interest rate differential between Norway and Sweden.