Castellum AB (publ)

Good morning, everyone, and welcome to this presentation of Castellum's Q3 report. 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. Let's start. Please go ahead, Paul.

Good morning and let's jump right into it. Let's start with the share buybacks. This morning we announced that we intend to buy up to additionally 8 billion of shares, obviously dependent on the share price and the value of our EPRAD net asset value, of course, and the difference between the share price and the net asset value. But up to 8 billion Swedish crowns share buybacks. And we have already bought back for 7.6 billion a month into roughly 62 million shares during the period January to September. So that will continue during this year and in the beginning of next year as well. During the quarter we have also, and due to our pretty big divestments, decided to reorganize Castellum from four to two regions. So two regions will disappear and be merged by two other regions. And the idea is that this will increase efficiency and reduce costs. And our aim is to reduce administration costs by 15%, which almost amounts to 100 million. During the quarter we closed the Alekta transaction with two properties here in Stockholm. After the reporting day we also closed the Vilbois transaction where we sold all our properties in Skåne. So those properties are still in our balance sheet and income statement. But from 1st of October, they are no more with us, but rather with we boys. And we are continuing with our strategy back to basics, which means less bureaucracy, greater efficiency and focus on leasing and not the least disciplined capital allocation. For those of you who are not too familiar with Castellum, we have a property fair valuation of almost 130 billion. We own 37% of a Norwegian office company listed on the Norwegian Stock Exchange called Entra that amounts to roughly 11 billion SEK. We have slightly more than 5 million square meters. Most of it is office. At the reporting day, we had 644 properties. Today, as we have handed over the properties in Skåne, we have around 545 properties and around 440-430 employees. Net leasing is obviously a very important key figure for us. During the year so far, we have positive net leasing of 105 million Swedish crowns. This includes the total portfolio. And if we look at the like for like or excluding projects, The actual net leasing is negative 63 million Swedish crowns. It has been a long period of time now where the sort of life for life or the excluding project portfolio has been negative. And our view and my view is as long as we see negative net leasing excluding projects, we will have issues with the growth of income in the life-for-life portfolio, we will struggle with not increasing the occupancy rate. So this is our main focus in the day-to-day business to increase leasing and reducing vacancies. And here we can see the occupancy, how that has been affected by the negative net leasing for the past year, where we had the best performance in 2022, where we were at almost 94% occupancy, and now we're down to 87%. And this is obviously the negative net leasing trickling down in these figures. This is the action within the portfolio. Around 30% of the portfolio, we've seen action in the portfolio during the year. Half of that, 40% of the total stock have just prolonged. 3% has renegotiated and 10% has terminated their leases. In the prolonged leases, there is obviously no change in the lease levels. And in the renegotiated lease, we have had to reduce the rent level by 2.5%. And so the changes due to prolonged lease term and renegotiation, the total of that is minus 0.4%. And here we can see what affects the lease levels we are or the in place rents we have in the portfolio. Obviously, we have disposed lots of properties and we have made some development and some acquisition. But looking at the like for like portfolio, we can see that even if we We are able to increase the average rent level a bit. The way you can see, it has a stronger effect on our in-place rent levels. So like for like, we're down minus 1.4% during the past 12 months. And increased vacancy and negative net leasing obviously also trickles down in the like for like figures, both for income, rental income, which is down minus 1.7%. And on the net operating income, if you look at the next slide, it's down even more, 3.6%, due to slightly increased costs compared with last year, and mainly due to a bit colder winter this year than last year. Now over to transactions, Kristoffer.

Yes, as most of you know, and as Paul mentioned briefly in the beginning, we have been quite active on the transaction market. We have signed deals totaling 25 billion of value so far this year. And with the large one being the divestment to AP7 signed in February, 5.6 billion of public properties. The divestment to Alekta signed in June, 5 billion of office properties in Stockholm. and the divestment of our assets and our organization in Skåne to Vilbois. 13.3 billion of mixed assets also signed in June. The Elekta transaction closed 1st of September and the Vilbois transaction closed 1st of October. In addition to these larger transactions, we have also signed a couple of smaller ones in total close to 650 million in property value, mixed both in terms of geography and category. And these figures on this page includes the divestments in Linköping and Umeå that was announced earlier this week. The total value, 24.6 billion, was just above 500 million or 2% above fair value a quarter before the transaction was signed. We are more focused on the total return we expect long term in relation to the price we get or return on equity perspective rather than price versus book value. In this table we also highlight the total profit and that is including all effects in the income statement. So that is value changes of course, but also goodwill and tax effects, which are quite the big ones in the income statement. The value of our properties as of the report date is 129 billion. As Paul mentioned, this includes the properties divested to Wilburys. Excluding that figure, that transaction, it's 116 billion. Please notice that we in the balance sheet in this report still have these Wilburys assets held for sale. During the nine months period, we invested 3 billion in our existing properties. Half of it, 1.5 billion, is new construction and that also includes extensions and reconstructions. 0.8 billion in TIs and 0.5 billion in maintenance investments. That's quite a large volume of investments in existing properties and projects. The value changes in the period minus 0.7 billion and of that actually 1 billion was in Q3. Of that 1 billion in Q3, roughly 300 million was realized and that is actually deduction for deferred tax for the electa transaction that was closed during that quarter and the remaining is more underlying unrealized value changes. A mix of categories, mix of geographies. Actually, all of our regions have a minus in front of it, a bit more in Gothenburg than in the rest of the regions, but minus in all of them. Cap rate in our valuations has been very stable over the last couple of years. So the value declines that we have seen has been more due to lower cash flow expectations. In this quarter, if we compare with the last quarter, the average exit yield is actually nine basis points higher and that is mainly explained by the two large properties we sold to Alecta, which of course had quite much lower yield requirements than the average of the group. Loan-to-value 37.4%, very stable. It was 37.3% last quarter. So stability and has been over quite some time. Also healthy headroom against policy which is maximum 40%. And this is also the larger divestments we have done during this year. We have used the proceeds for debt reduction 40% and equity reduction through share buybacks of 60%. So we are keeping the loan to value in all of those. divestments and what we use with the proceeds. Debt maturities 4.0 years, that is down from 4.5 years in the last quarter. That is due to that we have during the quarter closed some longer term loans linked to the divestments to Veal Boys and Alekta. So also the Veal Boys transaction we have close the financing in this quarter, before the transaction was closed. We also have one of costs related to this of 21 billion that is recorded in the Q3 report. So that is break costs for loans attributed to those properties. During the quarter, we issued a 300 million euro bond on the European bond market. Three year, 78 bips of credit margin. That was done in the end of August. At that point in time, the market was very good. Since then, we see some 10 to 15 basis points higher margins in the bond market. still stable margins in the banking system. And if you zoom out, then of course the bond markets margins are also still attractive, although they have, as I said, increased a bit over the last couple of weeks and months. Interest-bearing liabilities 56 billion, close to 50-50 split between banks and bonds. And we have an average fixed interest term of 2.7 years. We are currently hedged, well at the reported date we are hedged at 61%. Also, these wages will, all else equal, improve quite a lot in Q4 as the Beagle Boys proceeds came in on the 1st of October. We haven't entered any new interest rate swaps during Q3, and we only use plain vanilla interest rate swaps in the hedging portfolio. So as the headline here is, unutilized credit facilities, 14 billion. As I said, we used quite a lot of our RCFs during Q3 when we paid back debt to the Alekta and also for the Vilbois transaction. And then in the beginning of October, we have actually restored that. As of today, the unused credit facilities are much higher again. Average interest rate currently at 3.5%. That is same as last quarter. We moved up quite a bit in Q2. That was when we redeemed the cheap euro bonds of some 9 billion SEK which we in turn had to do to be able to execute on our strategy of asset rotation, being stable since then. And we actually think that it will be stable also going forward the next couple of quarters, given both the current pricing of the forward stiver, but also, as I said, it's quite high hedging and as of today 61% hedging as in the report and if we would calculate it as of today it would be something like 75%. ICR 3.1 times financial policy is that we should be about three times also ICR expected to be to be stable despite the market pricing of higher short-term interest rates. As Paul also mentioned, share buybacks so far during 2026, 7.6 billion, average price just south of 123 SEC per share. And with that, we have concluded both the 60% part of the proceeds from the Alecta and AP7 transactions as well as the part of the results for 2025. And then today announced the 80 billion which is the same proportion of the Wilburys transaction. Last week we held an EGM and at that point in time We have 9.9% of the shares and then of course the EDM decided to cancel those shares. Income from property management per share is on this slide increased 4.7% when comparing with the first nine months the same period last year. But then we have, of course, bought back shares from these transactions. It should be mentioned that they are, the AP7 transaction was closed on 15th of June and the Electa transaction 1st of September. So definitely generating some income for quite a large portion of that period. And looking at the 12 months instead, it's 3.4% up. Our net asset value per share is currently at 169 SEK. It has increased with 5.9% since year end. Just below half of it is due to profits and consequently a bit higher than half of it depends on share buybacks bought back substantially below net asset value. And as most of you know, our overall financial target is return on equity. Overall business cycle should be above 10%. Taking the first nine months of 2026 and annualizing the figure, we are at 5.2%. Far from the goal, but at least a small step in the right direction after four quite bad years. Questions, and I will repeat. If you'd like to ask a question by phone, please dial pound key five on the telephone keypad and ask your question. And the first question comes from Fredrik Stensler, ABG.