Nelly Group AB

Good morning, everyone, and welcome to this presentation of Castellum's Q3 report. My name is Christoffer Strømbeck and I'm head of investor relations. 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 your telephone keypad and ask your question. Let's start. Please go ahead, Paul Alsén.

Good morning. The mission from the owners and from the board to all at Castellum is crystal clear. Castellum needs to become more profitable. And I think that's an exciting and fun assignment, fun mission. But I don't think it will be a walk in the park. I think everyone knows that the heydays of real estate is over for this time. So now it's back to basics for Castellum in the day-to-day business. So instead of yield compression, it's leasing. Instead of interest rates, which were almost zero, It's turning over every stone to find ways to become more efficient and more cost efficient. But it's also in the day to day business, making sure that we are owning the right properties in the right locations and consequently seizing the opportunities we see in the transaction market. It means that we will become a more entrepreneurial company, I would say, and a less bureaucratic company. Although the net leasing in the third quarter, this quarter, was positive with 16 million crowns, we know that the net leasing for the previous quarters have been negative. In terms of vacancy rate, we know that our performance will become slightly worse going forward than it is right now due to this negative net leasing in previous quarters. So in the property management for us right now, it's mainly one focus and that's leasing, leasing and leasing. means that we have to become more flexible and faster in our leasing activities. At this stage, I've been CEO now for almost two months. I've seen almost all properties, not all our properties yet. And just a personal reflection, I think what I've seen so far of the property portfolio is actually a bit better than I had expected. Of course, that statement has to do with what I thought before I started, but at least it's slightly better than I thought. And I'm very happy about that. The locations are good and suits the type of purposes the buildings have. We have nice locations for office in inner cities. but also nice locations, but in B locations in the office segment. And then we have lots of industry and warehouse and logistics also in the right locations, given the purpose of those buildings. And I also think that the property portfolio is a bit more well-kept than I had thought before. So that's a nice starting point, I think, my new assignment here in Castellum. And the other reflection I would like to do is I met most, but not all of the staff and I'm meeting quite competent staff that know their property portfolio by heart. So I think we have a nice starting point for not turning the ship around, but really to get As I suppose most of you know, we are a commercial real estate company with most of our holdings in the southern part of Sweden. But we also have properties in Copenhagen and in Finland and mainly in Helsinki. Most of our assets are office properties. industry. And most of you also know that we have a significant share of the building in Norway called Entra, which owns mostly AAA located office buildings in Oslo. And we own almost 40% of that company. So all in all, we have almost, including Entra, we have almost properties

Thank you, Paul. Jumping into the summary of the results. The results compared with the same period last year is negatively affected by divestments and high vacancies. In addition, income from property management is impaired by high financial costs due to one-off profit from our bond repurchase last year. Net leasing the third quarter is positive 60 million and minus 166 for the period. Still happy to report two consecutive quarters with positive net leasing. Occupancy rate stands at 90%, which is somewhat lower than last quarter. Net investments are 3.5 billion compared with minus 327 the same period last year. Going into details, looking at development of income during the period, the Like for Like portfolio income is unchanged. Indexation contributes, but is offset by high vacancies. The vacancies is coming, quarters will continue to increase due to our weak net leasing in the first quarter. The direct property cost for the life to life portfolio is increased by C40 million equivalent to 2.5%. Direct property cost decreased at the beginning of the year due to the warm winter, though increased in the second and third quarter, primarily due to the high rental losses. which increased by SEK 25 million. Divestments decreased income with SEK 125 million, however, partially mitigated by acquisitions in the second quarter, contributing to the income with SEK 29 million. Central administrative and property administrative cost is in line with previous years. On an aggregate Get level NY decreased by SEK 226 million with divestments, increasing vacancies and one-off insurance claims recorded during second quarter previous year as key drivers. Looking at renegotiations corresponding to an annual rent of SEK 197 million, which translates to 9% of total lease stock up for renegotiation were conducted during the period. with an average positive change in rent of 1.6%, limited investments on average to secure the renegotiated leases. Additionally, contracts with an annual rent of CIEC 1.345 billion were extended during the period with no change in terms equivalent to 60% of total lease stock up for renegotiation, which is up from 50% in the second quarter. indicating that a good portion of our tenants are comfortable continuing paying their current rent after indexation. Net leasing for the quarter amounts to 16 million. For the period, the net leasing amounts to 166 minus. The economic occupancy rate amounts to 90%, a decline of 1.2% since third quarter 24. The decline is driven by increasing vacancies corresponding to 0.8%, and a general review of vacancy rents, which explains additional 0.4%. Looking at property values during the period, Castellum has written down property values with approximately 1.4 billion equivalent to 1%. The value chains is partly driven by the default of Northolt. The fact that Ofri will leave approximately 24 thousand square meters in Solna and generally lower cash flow expectations in our valuations due to a downward pressure on rental levels and or increasing tenant investments to uphold these levels in some of our markets. The valuation yield is in all essence the same as the second quarter 2025 at 5.63%. In addition, our projects continue to show positive value add. Looking into the transaction market in Sweden, the investment volume in the Swedish real estate sector ended up at approximately SEK 104 billion in the period, compared with SEK 82 billion in 2024 and 83 billion in 2023. Our investment volume, of the investment volume, approximately 20% was office properties, which is higher than 2024 and 2023. indicating growing interest into the office segment. However, on aggregate, a bit lower than the historical average. Looking at financial highlights, market conditions are very favorable. Credit margins at historically low levels and with attractive term premium. Current credit spreads in the domestic market for a three-year bond is at around 90 bps and for a five-year bond around 120 to 125 bps. European market is at the lower end of this range. Nordic banks continue to offer competitive pricing and are willing to increase volumes. S&P confirmed our BBB rating with stable outlook during the quarter, also hold a BA2 rating with stable outlook from MODIS. Low refinancing activity during the quarter. In total, we refinanced 1 billion in secure debt on a 10-year tenor. No activity in the bond market and limited bond maturities in the coming six months. Average interest rate currently at 3.1%, down from 3.2% during the second quarter. We see a potential to further reduce the average interest rate in our debt portfolio by refinancing loans and bonds on better terms. Looking at financial key ratios, very small changes in financial key ratios compared to the previous quarter. Loan-to-value now at 36.5% and ICR currently at 3.2 times. Comfortable headroom against policy levels and covenants. Average debt maturity and average fixed interest term stable at 4.6 and 3.6 years respectively. we would like to highlight that our interest rates hedging exclusively comprises plain vanilla interest rate swaps. Interest-bearing liabilities amounts to 57.5 billion, down by one billion since the beginning of the year. Over to you, Paul. Thank you, Jens.