Castellum AB (publ)

Good morning, everyone, and welcome to this presentation of the Q1 report. There will be a Q&A session in the end of the podcast. And if you'd like to ask a question by phone, please dial pound key five on the telephone keypad and ask your question. So let's start. We still have Paul. Good morning. As you probably all know by now, our main target in Gazelle is to achieve a return on equity of 10% over the business cycle. And during the autumn, we launched a new strategy, one could say, which we called Back to Basics. And one of the main principles in Back to Basics is to increase the transaction base. And during the quarter, we conducted two transactions, one smaller in Linköping and one bigger with a disposal of nine properties to 87 with a profit of 750 million. Another principle in Back to Basics is to be very prudent with the capital that the shareholders have given us. And if we can't earn it, we will return it. And during the quarter, we have repurchased almost 24 million shares. Another principle of Back to Basics is to have a tight grip on costs. And during the autumn, we sold our co-working operation of United Spaces. We made reorganization and cost cuts at the headquarters. And the administrative costs both in property management and in central administration is lower this quarter compared to the first quarter one year ago. And it's almost 100 million Swedish crowns lower. And of course, leasing, leasing, leasing is also one of the main principles in Factor Basics. It's still slow, but we have positive net leasing during the quarter, 82 million SEK, where 72 million was the leasing to Ericsson in Hagestad. So still slow, but positive. Castellum, our property portfolio value to 138 billion, but we also have two joint ventures. One joint venture in Gothenburg, Halvorslän, we got its logistics together with the harbor in Gothenburg, and then we own 37% of the shares of the listed Norwegian office company, Entra. We have a mixed use of FOMIO, mainly with office, but also a large proportion of warehouse and light industry and public sector properties. 5.3 million square meters lessable area and high sustainability focus. Now down to the details, so I'll hand over to you, Kristoffer. Thank you. So looking at the income and net operating income, both are down by some 3% compared to Q1 last year. It is mainly due to higher vacancies, but also higher direct property costs. However, with lower central administration, 24 million this quarter, 66 million last quarter, and in addition to that, somewhat lower interest costs from 10 million, and a better contribution from EMTRA of 17 million, this leaves us at positive territory in terms of income from property management. Property values were positive, 416 million, or 0.3%. And as Paul mentioned, the net leasing for the period is 82 million, where the large leasing in Harlequin to Ericsson is most of the debt. Occupancy now at 88.0%, somewhat lower than the last quarter. On the investment side, we have net investments in the quarter of $679 million. Of this, $886 million investments in existing properties. And then we sold properties for $214 million. So I'm not including the large IP7 transaction, but this was... transactions we made and communicated in the end of last year. The biggest one is one in Örebro. In some more details, income in the life-for-life portfolio decreased by 47 million, and that corresponds to 2%. And that is mainly due to the higher vacancies of 60 million compared to last year. in the quarter last year. Both income and cost are affected by this divestment of our co-working business. This is the first full quarter without that business. Income decreased by some 45 million and cost decreased by some 53 million. That is the quarterly net positive effect of 8 million. in line with what we announced in October when we sold the company. We indicated a positive yearly effect of $30 million. That's quite spot on. On the cost side, the light-to-light property cost increased with $45 million. Of this, $38 million was due to higher costs for heating and snow due to the COVID winter than the year before. And as Paul mentioned also, looking at administration costs, if we add both property administration and central administration, costs are down 99 million. However, half of that 53 million is related to this sole co-working business. And then please also note that we have 22 million of costs that we have moved from central administration to property administration. And this is part of that change that we did in the autumn, where we both reduced costs on the headquarters, but we also moved some staff to the regions. I would also say that we in this quarter have no material one-off, which we of course have quite a lot of in Q4. Looking at the lithium side. 14% of the total leaf stock that were up for renegotiation were renegotiated during this period with an average negative change in rent of 7.1%. It's quite small volume and it's no specific individual rental agreement behind it actually. A couple of them As usual, the largest proportion are extended at no changes in terms. About half of the volume, 49% or 249 million is rolled over with no changes in terms. And net leasing, as mentioned, 82 million. In addition to the Ericsson deal that we have talked about, we can also mention that we have some positive net leasing in Denmark of some 20 million. And we have some positive net leasing in the Mälardalen region of 18 million. And that is roughly the amount of a new leasing to light and invest the horse. Looking at property values, as mentioned, they are up with some $400 million, mainly due to the Infinity project in Hagestaden, some $300 million plus, and also the divestment of nine properties to 87, approximately $250 million up. That was also communicated in the first release in that transaction. So if we take those two away, the remaining part is actually a little bit lower than the last quarter. $138 billion of fair value, and this then of course includes the $5.6 billion transaction with 827, as that one is closing in EQ2. or a smaller part of it is actually initially free, but the big part initially. Also in this quarter, we have actually lower cash flows, cash flow expectations in our valuations, and that's the downward pressure on rental levels. That's the explanation to this smaller and negative value changes if we exclude infinity and eight to seven transactions. Looking at the financing side, market conditions remain favorable despite increased volatility. We saw some credit spreads widening during the quarter. The conflict in the Middle East escalated, but we have recovered continuously during the quarter and now in the beginning of Q2. Squares in the bond market are some 10-15 bids wider than the lows before the conflict started. Nordic banks continue to offer very competitive pricing and are willing to increase volumes And it's also on this side that we have been active in the quarter on the secured side with the refinancing of in total 6.8 billion bank loans. The average duration of those loans has been just over eight years, so quite long credit duration in the bank loans that we've offered currently. And that is of course contributing to the increase in our average debt maturity. We still have some $18 billion in cash and unutilized credit facilities, providing us with comfortable back-up to the upcoming maturities, which are not very big. Financial G-ratios broadly stable compared to previous quarter. However, slight increase in the loan to value now at 37.5%. Mainly explained by the fact that we have bought shares in the quarter of some 2 billion while the proceeds from the transactions comes in G2. ICR stable at 3.2 times and comfortable headroom against policies of 40% LTV and 3.0 times ICR. And as mentioned on the previous slide, average debt maturity is most likely higher, 4.5 years, and the average fixed interest term is 3 years. Interest bearing diabetes slightly up. Payment explanation a bit higher due to the mismatch in acquiring shares in the quarter and proceeds from the transaction in the next quarter. Looking at the divestments, we have done, as mentioned, two larger transactions. One large transaction and one with a small transaction. And the last one we have talked about quite a lot already. 5.6 billion public assets, 100% leased out, sold for 87. Fair value as of Q4 was 5.15 billion. The total earnings effect was 715 million. And that one is closing now in Q2 and Q3. The smaller one, maybe not small for the lean shipping market, $256 million sold to the one-man family. Big difference, 25% vacancies. From our perspective, quite a lot of investment needs in the prosperity going forward, and a good transaction from our perspective. An update on the share buybacks that we are conducting. After the divestment of the portfolio to IP7, the board announced that we are initiating a share buyback program. A total of 3.4 billion of that we have so far acquired for IP7. 2.7 billion that is up until today. Out of that, some 2 billion was acquired during the quarter and the remaining one in April. Average price 113 kronor per share. The large lease during the quarter, 24,000 square meters in Harjassadan. The entire building with a 16-year duration. Then it includes an option for the tenant up until first of June this year, so roughly in a month. We will know if they have a optionality to decrease it to a five-year tenant with approximately half of the volume. And to wrap things up, after some work on our sustainability performance, the day-to-day work to decrease our energy consumption goes on as previously. And during the quarter, we have reduced the energy consumption in the life-for-life portfolio with 4%. And roughly one-fourth of our electricity is self-generated mostly by solar panels. And before we let all the questions in, let me just summarize a bit. We have positive net leasing, 82 million, where of 72 from Ericsson. So it's the fourth quarter in a row with positive net leasing, but very low figures, one could say. So it still remains slow in the leasing market. We made two transactions very successfully, I would say, and that's part of the basic principle to remove everything that we don't believe will give a 10% return on equity. And the cost savings program we conducted during the autumn now comes into the figures. So with that, I think we can hand over to questions. Yes, we do. So if you'd like to ask a question by phone, please dial pound key five and ask a question. The first question comes from Tobias Tjall, Nordea.

Good morning. Thank you for the presentation and for taking my questions. First, I have a couple of general questions. Regarding your portfolio, is it possible to in some way quantify how large proportion that you think that doesn't meet your return requirement?

Not really. I think we are looking at that continuously. And one thing that's very important in that equation is actually what prices you can achieve. So it's difficult to answer that question. But I would say there's a big proportion that actually can achieve 10%. And there's a proportion also that I would say is borderline. And then there's a proportion that probably not, depending on prices, that not will meet our 10% return requirements. But I cannot give you a figure on that right now.