Castellum — Interim / Quarterly Report 2011

Jul 12, 2011

Planned new construction in Tornby Business Park, Linköping.

Half-year Report January-June 2011

Half-year Report January-June 2011

Castellum is one of the major listed real estate companies in Sweden. The fair value of the real estate portfolio amounts to approx. SEK 33 billion, and comprises commercial properties.

The real estate portfolio is owned and managed by six completely owned subsidiaries with strong local roots in five growth regions: Greater Gothenburg (incl. Borås, Halmstad and Alingsås), the Öresund Region (Malmö, Lund, Helsingborg and Copenhagen), Greater Stockholm, Mälardalen (Örebro, Västerås and Uppsala) and Eastern Götaland (Jönköping, Linköping, Värnamo and Växjö). Castellum is listed on NASDAQ OMX Stockholm AB Large Cap.

• Rental income for the period January-June 2011 amounted to SEKm 1,447 (SEKm 1,367 corresponding period previous year).
• Income from property management amounted to SEKm 555 (537), corresponding to SEK 3.38 (3.27) per share, an increase with 3%.
• Changes in value on properties amounted to SEKm 388 (366) and on interest rate derivatives to SEKm 67 (–89).
• Net income after tax for the period amounted to SEKm 757 (603), corresponding to SEK 4.62 (3.68) per share.
• Investments amounted to SEKm 841 (456) of which SEKm 528 (373) were new constructions, extensions and reconstructions and SEKm 313 (83) were acquisitions.

	2011 Jan-June	2010 Jan-June	2010	2009	2008	2007	2006	2005	2004	2003	2002
Income from property management, SEK/share	3.38	3.27	6.96	6.89	5.93	5.63	5.38	5.00	4.52	4.07	3.77
Change previous year	+3%	–4%	+1%	+16%	+5%	+5%	+8%	+11%	+11%	+8%	+14%
Net income after tax, SEK/share	4.62	3.68	11.98	0.98	– 4.04	9.07	10.21	7.89	5.59	2.68	4.00
Change previous year	26%		pos. +1,122%	pos.	neg.	–11%	+29%	+41%	+108%	–33%	–30%
Dividend, SEK/share			3.60	3.50	3.15	3.00	2.85	2.62	2.38	2.13	1.88
Change previous year			+3%	+ 11%	+5%	+5%	+9%	+11%	+12%	+13%	+15%
Property value, SEKm	32,896	30,032		31,768 29,267	29,165	27,717	24,238	21,270	19,449		18,015 17,348
Investments, SEKm	841	456	1,506	1,165	2,738	2,598	2,283	1,357	1,268	1,108	1,050
Loan to value	51%	52%	50%	52%	50%	45%	45%	45%	45%	48%	48%

Business Concept

Castellum's business concept is to develop and add value to its real estate portfolio, focusing on the best possible earnings and asset growth, by offering customised commercial properties, through a strong and clear presence in fi ve Swedish growth regions.

Objective

Castellum's operations are focused on cash fl ow growth, which along with a stable capital structure provide the preconditions for good growth in the company, while at the same time offering shareholders a competitive dividend.

The objective is an annual growth in cash fl ow, i.e. income from property management per share, of at least 10%. In order to achieve this objective, net investments of at least 5% of the property value will be made yearly, which at the moment is equivalent to approx. SEKm 1,600. The previous ambition to invest at least SEKm 1,000 per year has been adjusted since the real estate portfolio as well as the investment capacity were less when it was adopted. All investments will contribute to the objective of growth in income from property management within 1-2 years and have a potential asset growth of at least 10%. Sales of properties will take place when justifi ed from a business standpoint and when an alternative investment with a higher return can be found.

Strategy for Funding

Capital structure

Castellum will have a stable capital structure, meaning a loan to value ratio not permanently exceeding 55% and an interest coverage ratio of at least 200%.

Purchase or transfer of own shares shall be available as a method to use for adjusting the company's capital structure to the company's capital need and as payment or funding of real estate investments. Own shares may not be traded for the sole purpose of capital gain.

Dividend

At least 50% of income from property management before tax will be distributed, however investment plans, consolidation needs, liquidity and fi nancial position in general will be taken into account. Since the base changed to income from property management before tax, 50% of the new base is a higher level then 60% of income from property management after nominal tax as well as closer to the actual dividend in recent years.

The stock and credit markets

Castellum will work for a competitive total return in the company's share in relation to the risk and for a high liquidity.

However, all actions will be made from a long term perspective and the company will have a frequent, open and fair reporting to shareholders, the capital and credit markets as well as media, yet without disclosing any individual business relation.

In the long term Castellum will be one of the largest listed real estate companies in Sweden.

Customers and organization

The customers - a reflection of Swedish domestic economy

Castellum has approx. 4,500 commercial contracts, with good risk exposure regarding both geography, type of premises, length of contracts and fields of industry of the customer. The single largest contract corresponds to approx. 1% of Castellum's total rental income.

Satisfied customers

It is important that Castellum meets the customers' expectations. To follow up and evaluate efforts made, an external customer survey is carried out annually, Satisfi ed Customer Index.

The latest survey which was carried out 2010 and included offi ces, warehouses, industry- and retail, continues to show consistently high marks for Castellum. A large portion of the surveyed customers replies willing to lease from Castellum again and gladly recommends Castellum as a landlord to others.

Commercial leases

Commercial leases are signed for a certain period of time, generally 3-5 years, where the period of notice is 9 months. The leases normally include a base-rent and an index clause, which provides for an adjustment of the rent corresponding to a certain percentage or connected to the infl ation, and also additions for the tenant's share of the property's total costs for heating, cooling and property tax.

Decentralized and small-scale organization

Castellum's operations are run in a small-scale organization consisting of six subsidiaries which own and manage the properties under their own brands. By having local roots the subsidiaries make close relations with the customers, and have good knowledge of the market situation and rental development within each market area. Property management is mainly carried out by own personnel.

Subsidiaries with strong brands

Castellum has six wholly owned subsidiaries which each have about 35 employees. The subsidiaries organizations are not identical but are in principal made up of a Managing Director, 3-4 market areas, business developers and 3-5 employees within fi nance and administration. Each market area employs one property manager with one assistant, one person working with leasing and 3-5 facility managers, where everyone has customer contact. The fl at organization gives a short decision making process and creates a customer oriented and active organization. Castellum's subsidiaries operate under their own names which are strong brands on each local market.

Employees

Castellum is working actively in order to hire and keeping good employees by offering a stimulating work environment, competence development and sharing of experiences both internally and externally.

The employees' view on Castellum is regularly measured and the survey shows that the employees enjoy their working situation and have a high confi dence towards the company and its management.

The group has approx 230 employees.

Measuring, comparing and controlling

Castellum measures and compares the subsidiaries' management effi ciency and asset value growth in the real estate portfolio. Within the group experiences are shared between the companies and specialist expertise can therefore be made available to the whole organization.

Castellum's operations are controlled by rules for decision making and work allocation, policies and instructions. Policies are in place for among others fi nance and fi nancial work, information, information safety, environment, insurance, electricity and personnel.

Responsible business

Since 1995 Castellum has been working with sustainable issues such as developing the properties in those cities were the subsidiaries are present, a common set of values for actions towards employees, customers and vendors as well as active work on environmental issues.

The environmental work is focused on effi cient energy consumption and improving the properties' environmental status. Two of Castellum's subsidiaries, Fastighets AB Brostaden and Harry Sjögren AB, have been assigned Green Building Corporate Partner by the EU, which can be seen as a receipt for long-term effi cient work in decreasing the energy consumption. The group has more than 86 Green Building classifi ed properties. Eklandia Fastighets AB has during 2009 received the fi rst BREEAMcertifi cate in Sweden for a new property in Gothenburg.

and Västerås

Malmö, Lund, Helsingborg and Copenhagen

Örebro, Uppsala Greater Stockholm

Jönköping, Linköping, Värnamo and Växjö

Central, Northern and Eastern Gothenburg

Southern Greater Gothenburg, Borås, Halmstad and Alingsås

Income, Costs and Results

Comparisons, shown in brackets, are made with the corresponding period previous year except in parts describing assets and fi nancing, where comparison are made with the end of previous year. For defi nitions see Castellum's website, www.castellum.se

Income from property management, i.e. net income excluding changes in value and tax, amounted to SEKm 555 (537), equivalent to SEK 3.38 (3.27) per share - an increase with 3%. Income from property management rolling four quarters amounted to SEKm 1,159 (1,110) equivalent to SEK 7.07 per share (6.77) - an increase with 4%.

During the period, changes in value on properties amounted to SEKm 388 (366) and on interest rate derivatives to SEKm 67 (–89). Net income for the period was SEKm 757 (603), equivalent to SEK 4.62 (3.68) per share.

Rental income

Group rental income amounted to SEKm 1,447 (1,367). For offi ce and retail properties, the average contracted rental level, including charged heating, cooling and property tax, amounted to SEK 1,221 per sq.m., whereas it for warehouse and industrial properties amounted to SEK 723 per sq.m. Rental levels, which are considered to be in line with the market, have increased by 1.7% in comparable portfolio compared with previous year.

The average economic occupancy rate was 89.0%.

The total annual rental value for vacant premises on yearly basis amounted to approx. SEKm 380.

The gross leasing (i.e. the annual value of total leasing) during the period was SEKm 189 (115), of which SEKm 38 (13) were leasing of new constructions, extensions and reconstructions. Notices of termination amounted to SEKm 132 (104), of which bankruptcies were SEKm 7 (3), hence net leasing for the year were SEKm 57 (11). The time difference between reported net leasing and the effect in income thereof is estimated to between 9-18 months.

Net leasing

The activity in the rental market has been good during the second quarter in terms of both demand and signed new leases, even if the inflow of new inquiries declined before the summer months. The development is the same for all of Castellum's submarkets and property types.

Rental levels are considered to remain stable or, in some submarkets, slightly increasing. Current infl ation rate indicates an index adjustment for 2012 of 2%-3%.

Property costs

Property costs amounted to SEKm 526 (507) corresponding to SEK 319 per sq.m. (317). The costs for heating during the period has been calculated to 93% (113%) of a normal year according to the degree day statistics.

Property costs, SEK/sq.m.

	Offi ce/	Warehouse/
	Retail	Industrial	Total
Operating expenses	224	147	188
Maintenance	39	20	31
Ground rent	7	7	7
Real estate tax	66	17	43
Direct property costs	336	191	269
Leasing and property administration (indirect)	–	–	50
Total	336	191	319
Previous year	343	191	317

Central administrative expenses

Central administrative expenses were SEKm 45 (39). This includes costs for a profi t and share price related incentive plan for 10 persons in executive management of SEKm 9 (5).

Net interest rate

Net interest items were SEKm –321 (–284). The average interest rate level was 4.0% (3.7%).

Changes in value

The Swedish property market has during the period remained strong with a transaction volume amounting to approx. SEK 50 billion, which exceeded the corresponding period previous year with approx. 9%. Commercial properties accounted for approx. 70% of the sales on the market and the share of foreign investors increased during the period. Despite a strong demand and small supply for all property segments and in all of Castellum's markets, the prices in completed transactions shows unchanged yield levels since the beginning of the year.

The change in value during the period in Castellum's portfolio amounted to SEKm 388 (366), corresponding to approx. 1%. The change in value consists of SEKm 275 which mainly relates to changed future cashfl ows due to future index increases, SEKm 86 due to acquisitions and project gains and SEKm 27 due to sales of 3 properties where the sale price of SEKm 103 exceeded the valuations with 36%. Castellum has not changed the required yield in the internal valuations during the fi rst half-year.

Castellum uses interest rate derivatives in order to achieve the desired interest rate maturity structure. If the agreed interest rate deviates from the market interest rate there is a theoretical surplus or sub value in the interest rate derivatives, where the non cash fl ow effecting changes in value are reported in the income statement. Castellum has also a few derivaties in order to hedge currency fl uctuation in the investment in Denmark. The value has changed, due to mainly changes in long term market interest rates and the time factor, with SEKm 66 (–89) and the value was SEKm –508 (–574) at the end of the period.

Tax

The nominal corporate tax rate in Sweden is 26.3%. Due to the possibility to make depreciations for tax purposes, reconstructions deductible for tax purposes, and to use tax loss carry forwards there are in principle no paid tax costs. Paid tax occur because a few subsidiaries are not allowed to make fi scal group contributions.

Remaining tax loss carry forwards can be calculated to SEKm 1,243 (1,406). The properties' fair value exceed their fi scal value by SEKm 15,659 (14,829) of which SEKm 168 relates to properties acquired accounted for as asset acquisitions. As deferred tax liability a full nominal 26.3% tax of the net difference is reported, reduced with the deferred tax relating to asset acquisitions, i. e. SEKm 3,747 (3,502).

Castellum has no ongoing formal tax disputes.

Tax Calculation 30-06-2011	Basis	Basis
	current tax	deferred
SEKm		tax
Income from property management	555
Deductions for tax purposes
depreciations	– 305	305
reconstructions	– 139	139
Other tax allowances	– 11	0
Taxable income from property management	100	444
Properties sold	5	– 15
Changes in value on properties	–	361
Changes in value on interest rate derivatives	67	–
Taxable income before tax loss carry forwards	172	790
Tax loss carry forwards, opening balance	– 1,406	1,406
Tax loss carry forwards, closing balance	1,243	– 1,243
Taxable income	9	953
Of which 26.3% current/deferred tax	– 2	– 251

Accounting Principles

Castellum follows the by the EU adopted IFRS standards and the interpretations of them (IFRIC). This interim report has been prepared according to IAS 34 Interim Financial Reporting. Castellum has during the the period aquired two properties in Denmark, implying that effects of exchange rates are accounted for in other total income in the Group-accounts, while it for the parent company is reported directly in shareholder's equity. Castellum also has a few derivatives, in order to hedge currency fl uctuation in the investment in Denmark, where the effective parts of unrealized changes in value are accounted for in other total income in the Group-accounts, while it for the parent company is reported directly in shareholder's equity. Accounting principles and methods for calculations have otherwised remained unchanged compared to the Annual Report previous year.

Real Estate Portfolio

The real estate portfolio is found in Greater Gothenburg, the Öresund Region, Greater Stockholm, Mälardalen and Eastern Götaland. The main focus with approx. 75% of the portfolio is in the three major urban regions.

The commercial portfolio consists of 67% offi ce and retail properties as well as 30% warehouse and industrial properties. The properties are located from inner city sites (except in Greater Stockholm from inner suburbs) to wellsituated working-areas with good means of communication and services. The remaining 3% consist of project and undeveloped land.

Castellum owns approx. 770,000 sq.m. unutilized building rights and ongoing projects with remaining investments of approx. SEKm 800.

Investments

During the period the real estate portfolio has changed according to the table below.

Changes in the real estate portfolio Value, SEKm		Number
Real estate portfolio on 1 January, 2011	31,768	598
+ Acquisitions	313	7
+ New constructions, extensions and reconstructions	528	–
– Sales	– 76	– 3
+/– Unrealized changes in value	361	–
+/– Currency translation	2	–
Real estate portfolio on 30 June, 2011	32,896	602

During the period investments totalling SEKm 841 (456) were made, of which SEKm 528 (373) where new constructions, extensions and reconstructions and SEKm 313 (83) were acquisitions. Of the total investments SEKm 402 related to Greater Gothenburg, SEKm 176 to the Öresund Region, SEKm 115 to Mälardalen, SEKm 99 to the Greater Stockholm and SEKm 49 to Eastern Götaland.

Following sales of SEKm 103 (57) the net investments amounted to SEKm 738 (399).

Net property investments

Property value

Internal valuations

Castellum assesses the value of the properties through internal valuations. These are based on a 10-year cash fl ow-based model with an individual valuation for each property of both its future earnings capacity and the required market yield. Projects in progress have been valued using the same principle, but with deductions for remaining investments. Sites with building rights have been valued on the basis of an estimated market value per square metre, on average approx. SEK 950 per sq.m. In order to ensure and validate the quality of the internal valuations, an external valuation representing over 50% of the portfolio is made every yearend. The difference between the internal and external values has historically been small.

Based on these internal valuations the value of the properties at the end of the period were assessed to SEKm 32,896 (31,768), corresponding to SEK 9,778 per sq.m.

Average valuation yield
(excl. project/land and building rights)	SEKm
Net operating income properties	1,003
+ Estimated index adjustment 2012, 2%	31
+ Real occupancy rate, 94% at the lowest	116
+/- Property costs to a normal year	24
– Property administration, 30 SEK/sq.m.	– 50
Normalized net operating income (6 months)	1,124
Valuation (excl. building rights of SEKm 496)	31,462
Average valuation yield	7,1%

Lager projects	Area	Econ. occup.		Total inv., Remain. inv
Property		sq.m. rate, June 2011	SEKm	SEKm		Completed Comment
Forskaren 2, Lund	7,600	10%	150	94	Q 4 2012	New construction offi ce premises
Fullriggaren 4, Malmö	5,800	0%	149	110	Q 4 2012	New construction offi ce premises
Gården 15, Linköping	10,000	30%	106	95	Q 1 2013	New construction offi ce/retail/warehouse
Boländerna 30:2, Uppsala	14,000	80%	64	5	Q 1 2012	Reconstruction and new construction retail premises
Inköparen 1, Örebro	4,300	40%	68	62	Q 4 2012	New construction offi ce premises
Saltmossen 3, Botkyrka	5,300	100%	45	19	Q 3 2011	New construction warehouse/logistic premises
Kärra 72:36, Gothenburg	6,450	100%	39	1	Q 3 2011	New construction warehouse/logistic premises
Elementet 4, Sollentuna	3,350	0%	31	31	Q 1 2012	New construction warehouse/logistic premises
Larger acquisitions during 2011 Property	Area	Econ. occup. Acquisitions sq.m. rate, June 2011	SEKm		Access	Category
Lundbyvassen 3:1, Gothenburg	10,800	100%	183		April 2011	Offi ce
Roskildevej 22, Copenhagen, Denmark	8,500	100%	51		April 2011	Offi ce
Part of Lindholmen 735:491, Gothenburg	–	–	32		June 2011	Land acquisition, building right 11,500 sq.m.
Abildager 26-28, Copenhagen, Denmark	3,470	100%	24		July 2011	Offi ce
Larger sales during 2011 Property	Area, q.m		Sales prices SEKm		Access	Category
Haifa 1, Stockholm	3,750		76		March 2011	Offi ce

Castellum's real estate portfolio 30-06-2011

			30-06-2011					January-June 2011
											Net
	No. of	Area thous.	Property value	Property value	Rental value	Rental value	Economic occupancy	Rental income	Property costs	Property costs	operating income
	properties	sq.m.	SEKm	SEK/sq.m.	SEKm	SEK/sq.m.	rate	SEKm	SEKm	SEK/sq.m.	SEKm
Offi ce/retail
Greater Gothenburg	76	407	5,857	14,398	263	1,295	94.7%	249	66	326	183
Öresund Region	54	335	5,097	15,209	232	1,382	85.8%	199	57	340	142
Greater Stockholm	51	343	4,333	12,643	228	1,331	77.6%	177	63	367	114
Mälardalen	74	360	3,681	10,209	194	1,074	92.2%	179	60	332	119
Eastern Götaland	52	320	2,936	9,183	161	1,005	89.3%	143	50	316	93
Total offi ce/retail	307	1,765	21,904	12,411	1,078	1,221	87.9%	947	296	336	651
Warehouse/industrial
Greater Gothenburg	101	653	4,745	7,267	239	732	95.8%	229	60	183	169
Öresund Region	41	298	1,743	5,853	104	702	82.3%	86	28	186	58
Greater Stockholm	41	210	1,887	8,989	97	922	92.4%	89	29	276	60
Mälardalen	38	158	933	5,892	56	713	93.0%	53	16	197	37
Eastern Götaland	34	184	746	4,045	47	507	83.7%	39	11	126	28
Total warehouse/industrial	255	1,503	10,054	6,687	543	723	91.3%	496	144	191	352
Total	562	3,268	31,958	9,778	1,621	992	89.0%	1 443	440	269	1,003
Leasing and property administration									81	50	– 81
Total after leasing and property administration									521	319	922
Development projects	10	56	621	–	26	–	–	14	7	–	7
Undeveloped land	30	–	317	–	–	–	–	–	–	–	–
Total	602	3,324	32,896	–	1,647	–	–	1,457	528	–	929

The table above relates to the properties owned by Castellum at the end of the period and refl ects the income and costs of the properties as if they had been owned during the whole period. The discrepancy between the net operating income of SEKm 929 accounted for above and the net operating income of SEKm 921 in the income statement is explained by the deduction of the net operating income of SEKm 1 on properties sold during the period, as well as the adjustment of the net operating income of SEKm 9 on properties acquired/completed during the period, which are recalculated as if they had been owned or completed during the whole period.

Property related key ratios Segment information

	2011 Jan-June	2010 Jan-June	2010 Jan-Dec
Rental value, SEK/sq.m.	992	973	974
Economic occupancy rate	89,0%	88.7%	89.0%
Property costs, SEK/sq.m.	319	317	298
Net operating income, SEK/sq.m.	564	545	569
Property value, SEK/sq.m.	9,778	9,146	9,499
Number of properties	602	587	598
Lettable area, thousand sq.m.	3,324	3,216	3,311

		Rental income	Income from property management
SEKm	2011 Jan-June	2010 Jan-June	2011 Jan-June	2010 Jan-June
Greater Gothenburg	472	451	215	205
Öresund Region	282	285	112	122
Greater Stockholm	270	247	94	93
Mälardalen	240	215	81	71
Eastern Götaland	183	169	68	59
Total	1,447	1,367	570	550

The discrepancy between the income from property management of SEKm 570 (550) above and the groups accounted income before tax of SEKm 1,010 (814) consists of unallocated income from property management of SEKm –15 (–13), changes in property value of SEKm 388 (366) and changes in values of interest rate derivatives of SEKm 67 (–89).

Financing

Financing 30-06-2011

Shareholders' equity and net asset value

The net asset value can be calculated as follows.

Net asset value 30-06-2011
		SEKm SEK/share
Equity according to the balance sheet	11,249	69
Reversed
Derivatives according to balance sheet	508	3
Deferred tax according to balance sheet	3,747	23
Long term net asset value (EPRA NAV)	15,504	95
Deduction
Derivatives as above	– 508	– 3
Estimated real liability, deferred tax 5%	– 721	– 5
Actual net asset value (EPRA NNNAV)	14,275	87

Interest-bearing liabilities

The fi rst half-year was characterized by increased short term interest rates. The outlook for Swedish economy is good, which implies market expectations of continued increases of the repo rate to 2.25%-2.50% at the end of 2011. However, increased uncertainty can be seen for the economic growth rate and for future increases of the repo rate. The availability to and price of credits for Castellum can be described as stable.

Loan maturity structure

During the period Castellum has signed new agreements of SEKm 500 and renegotiated agreements of SEKm 5,500 As of 30 June, 2011 Castellum had long term binding credit agreements totalling SEKm 18,562 (18,062), short term binding credit agreements totalling SEKm 420 (520) and a commerial paper program of SEKm 4,000 (4,000). After deduction of liquid assets of SEKm 104 (12), net interest bearing liabilities were SEKm 16,573 (15,769), of which SEKm 2,015 (1,377) refers to outstanding commercial papers.

Most of Castellum's loans are short term revolving loans, utilized in long-term binding credit agreements. This means great fl exibility in the interest rate base, interest rate period and capital tied up.

Long-term loan committments in banks are secured by pledged mortgages and/or fi nancial covenants. Outstanding commercial papers are unsecured. The fi nancial covenants state a loan to value ratio not exceeding 65% and an interest coverage ratio of at least 150% which Castellum fulfi l with good margin, 51% respectively 273%.

The average duration of Castellum's long term credit agreements was 5.4 years (5.0). Margins and fees on long term credit agreements had an average duration on 3.4 years (2.6).

Loan maturity structure 30-06-2011
Long term, SEKm	Credit agreements	Utilized
1 - 2 years	200	–
2 - 3 years	–	–
3 - 4 years	2,500	1,000
4 - 5 years	8,800	7,100
> 5 years	7,062	6,562
Total long term credit agreements	18,562	14,662
Total short term credit agreements (0-1 year)	2,435	1,911
Total credit agreements	20,997	16,573
Unutilized credit in long term credit agreements		1,989

Interest rate maturity structure

The average effective interest rate as of 30 June, 2011 was 4.1% (3.9%). The market interest rate for an equal portfolio, regarding both current market rate and credit margin, can be assessed to 4.4% (4.0%). The average fi xed interest term on the same date was 2.5 years (2.6). Credit margins are allocated in the same interval as the underlying loan.

In order to achieve a desired interest rate maturity structure Castellum is working with interest rate derivatives which is both fl exible and cost effective.

Interest rate maturity structure 30-06-2011
		Interest rate
	Loan	derivatives		Average
	SEKm	SEKm	Net, SEKm	interest rate
0 - 1 year	16,573	– 9,300	7,273	3.7%
1 - 2 years	–	1,400	1,400	3.9%
2 - 3 years	–	1,800	1,800	4.6%
3 - 4 years	–	1,000	1,000	4.2%
4 - 5 years	–	2,300	2,300	4.5%
5 - 10 years	–	2,800	2,800	4.7%
Total	16,573	–	16,573	4.1%

Interest rate and currency derivatives

According to the accounting standard IAS 39 derivatives are subject to market valuation. Regarding interest rate derivatives this means that there is a theoretical surplus / sub value if the stipulated interest rate varies from the current market rate, where the change in value, for Castellum, are accounted for in the income statement. As for currency derivatives a theoretical surplus / sub value occurs if the agreed exchange rate deviates from the current exchange rate, where the effective portion of changes in value is accounted for in other total income.

As of 30 June, 2011, the market value of the interest rate and the currency derivative portfolio amounted to SEKm –508 (–574).

Consolidated statement of Comprehensive Income
	2011	2010	2011	2010	Rolling 4 quarters	2010
SEKm	April-June	April-June	Jan-June	Jan-June	July 10-June 11	Jan-Dec
Rental income	730	693	1,447	1,367	2,839	2,759
Operating expenses	– 128	– 117	– 310	– 303	– 554	– 547
Maintenance	– 28	– 30	– 52	– 53	– 104	– 105
Ground rent	– 6	– 5	– 12	– 8	– 23	– 19
Real estate tax	– 36	– 37	– 71	– 69	– 142	– 140
Leasing and property administration	– 40	– 38	– 81	– 74	– 156	– 149
Net operating income	492	466	921	860	1,860	1,799
Central administrative expenses	– 25	– 22	– 45	– 39	– 90	– 84
Net interest rates	– 162	– 141	– 321	– 284	– 611	– 574
Income from property management	305	303	555	537	1,159	1,141
Changes in value
Properties	291	320	388	366	1,244	1,222
Derivatives	– 104	– 36	67	– 89	447	291
Income before tax	492	587	1,010	814	2,850	2,654
Current tax	– 1	– 3	– 2	– 5	– 2	– 5
Deferred tax	– 128	– 154	– 251	– 206	– 730	– 685
Net income for the period/year	363	430	757	603	2,118	1,964
Other total net income
Translation of currencies	1	–	1	–	1	–
Unrealized change in value, derivatives	– 1	–	– 1	–	– 1	–
Total net income for the period/year	363	430	757	603	2,118	1,964

Since there are no minority interests the entire net income is attributable to the shareholders of the parent company.

Data per Share
	2011	2010	2011	2010	Rolling 4 quarters	2010
	April-June	April-June	Jan-June	Jan-June	July 10-June 11	Jan-Dec
Average number of shares, thousand	164,000	164,000	164,000	164,000	164,000	164,000
Income from property management, SEK	1.86	1.85	3.38	3.27	7.07	6.96
Income from property management
after tax (EPRA EPS*), SEK	1.76	1.66	3.23	3.06	6.79	6.62
Earnings after tax, SEK	2.21	2.62	4.62	3.68	12.91	11.98
Outstanding number of shares, thousand	164,000	164,000	164,000	164,000	164,000	164,000
Property value of properties, SEK	201	183	201	183	201	194
Long term net asset value (EPRA NAV*), SEK	95	84	95	84	95	92
Actual net asset value (EPRA NNNAV*), SEK	87	74	87	74	87	85

Since there is no potential common stock (e.g. convertibles), there is no effect of dilution.

Financial Key Ratios
	2011	2010	2011	2010	Rolling 4 quarters	2010
	April-June	April-June	Jan-June	Jan-June	July 10-June 11	Jan-Dec
Net operating income margin	67%	67%	64%	63%	66%	65%
Interest coverage ratio	288%	315%	273%	289%	290%	299%
Return on actual net asset value	13.5%	19.1%	14.0%	13.2%	22.7%	21.5%
Return on total capital	9.3%	10.3%	7.8%	8.0%	9.7%	9.8%
Investments, SEKm	319	201	841	456	1,891	1 506
Loan to value ratio	51%	52%	51%	52%	51%	50%

*EPRA, European Public Real Estate Association, is an association for listed real estate owners and investors in Europe, which among other things, sets standards for financial reporting. A part of that is key ratios EPRA EPS (Earnings Per Share), EPRA NAV (Net Asset Value) and EPRA NNNAV (Triple Net Asset Value).

Consolidated Balance Sheet

SEKm	30 June 2011	30 June 2010	31 Dec 2010
Assets
Investment properties	32,896	30,032	31,768
Other fi xed assets	13	16	15
Current receivables	168	148	141
Cash and bank	104	12	12
Total assets	33,181	30,208	31,936
Shareholders' equity and liabilities
Shareholders' equity	11,249	9,721	11,082
Deferred tax liability	3,747	3,029	3,502
Derivatives	508	954	574
Long term interest-bearing liabilities	16,677	15,675	15,781
Non interest-bearing liabilities	1,000	829	997
Total shareholders' equity and liabilities	33,181	30,208	31,936
Pledged assets (property mortgages)	18,873	17,701	17,421
Contingent liabilities	_	–	–

Changes in Equity

	Number of outstanding		Other capital	Retained
SEKm	shares, thousand Share capital		contribution		earnings Total equity
Shareholders' equity 31-12-2009	164,000	86	4,096	5,510	9,692
Dividend, March 2010	–	–	–	– 574	– 574
Total net income January-June 2010	–	–	–	603	603
Shareholders' equity 30-06-2010	164,000	86	4,096	5,539	9,721
Total net income July-December 2010	–	–	–	1,361	1,361
Shareholders' equity 31-12-2010	164,000	86	4,096	6,900	11,082
Dividend, March 2011	–	–	–	– 590	– 590
Total net income January-June 2011	–	–	–	757	757
Shareholders' equity 30-06-2011	164,000	86	4,096	7,067	11,249

Cash Flow Statement

	2011	2010	2011	2010	Roll. 4 quarters	2010
SEKm	April-June	April-June	Jan-June	Jan-June	July 10-June 11	Jan-Dec
Net operating income	492	466	921	860	1,860	1,799
Central administrative expenses	– 25	– 22	– 45	– 39	– 90	– 84
Reversed depreciations	2	1	3	3	6	6
Net interest rates paid	– 176	– 162	– 292	– 269	– 618	– 595
Tax paid	0	– 1	– 6	– 4	– 11	– 9
Cash fl ow from operating activities before
change in working capital	293	282	581	551	1,147	1,117
Change in current receivables	– 13	– 35	– 22	5	– 15	12
Change in current liabilities	– 58	– 70	84	20	148	84
Cash fl ow from operating activities	222	177	643	576	1,280	1,213
Investments in new constructions, refurbishments and extensions	– 284	– 201	– 528	– 373	– 1,036	– 881
Property acquisitions	– 35	–	– 313	– 83	– 855	– 625
Change in liabilities at acquisitions of property	– 238	– 8	– 105	– 8	40	137
Property sales	–	–	98	54	263	219
Change in receivables at sales of property	24	6	– 3	33	– 4	32
Other net investments	– 5	– 2	– 6	– 2	– 8	– 4
Cash fl ow from investment activities	– 538	– 205	– 857	– 379	– 1,600	– 1,122
Change in long term liabilities	307	602	896	381	1,002	487
Dividend paid	–	– 574	– 590	– 574	– 590	– 574
Cash fl ow from investment activities	307	28	306	– 193	412	– 87
Cash fl ow for the period/year	– 9	0	92	4	92	4
Cash and bank, opening balance	113	12	12	8	12	8
Cash and bank closing balance	104	12	104	12	104	12

Opportunities and Risks for Group and Parent Company

Opportunities and risks in the cash flow

Increasing market interest rates is normally over time an effect of economic growth and increasing infl ation, which is thought to give higher rental income. This is in part due to that the demand for premises is thought to increase, leading to reduced vacancies and hence the potential for increasing market rents and in part due to that the index clause in the commercial contracts is compensating the increasing infl ation.

An economic boom therefore means higher interest costs but also higher rental income, while the opposite relationship is true during a recession. The change in rental income and interest costs does not take place at the exact same time, why the effect on income in the short term may occur at different points in time.

Sensitivity analysis - cash fl ow
Effect on income next 12 months
Effect on income, SEKm Probable scenario
	+/- 1% (units)	Boom	Recession
Rental level / Index	+29/–29	+	–
Vacancies	+32/–32	+	–
Property costs	–10/+10	–	0
Interest costs	–70/+70	–	+

Opportunities and risks in property values

Castellum reports its properties at fair value with changes in value in the income statement. This means that the result in particular but also the fi nancial position may be more volatile. The values of the properties are determined by supply and demand, where the prices are mainly depending on the properties' expected net operating income and the buyer's required yield. An increasing demand gives lower required yields and hence an upward adjustment in prices, while a weaker demand has the opposite effect. In the same way, a positive real development in net operating income gives an upward adjustment in prices, while a low real growth has the opposite effect.

In property valuations consideration should be taken to an uncertainty range of +/– 5-10%, in order to refl ect the uncertainty that exist in the assumptions and calculations made.

Sensitivity analysis - change in value
Properties	–20%	–10%	0	+10%	+20%
Changes in value, SEKm – 6,579		– 3,290	0	3,290	6,579
Loan to value ratio	63%	56%	51%	46%	42%

Financial risk

Ownership of properties presumes a working credit market. Castellum's greatest fi nancial risk is to lack access to funding. The risk is reduced by low loan to value ratio and long term credit agreements.

The Parent Company

The parent company Castellum AB is responsible for matters concerning the stock market such as consolidated reports and stock market information and the credit market such as funding and fi nancial risk management.

The parent company takes part in property related operations through involvement in the Board of the subsidiaries.

Income statement	2011	2010	2011	2010
SEKm	April-June	April-June	Jan-June	Jan-Dec
Income	4	3	8	15
Operating expenses	– 18	– 16	– 31	– 59
Net fi nancial items	7	7	8	12
Dividend	–	–	–	658
Changes in value, interest
rate derivatives	– 104	– 36	67	291
Income before tax	– 111	– 42	52	917
Tax	29	11	– 14	– 69
Net income for the period/year	– 82	– 31	38	848
Balance sheet		30 June	30 June	31 Dec
SEKm		2011	2010	2010
Participations in group companies		4,087	4,087	4,087
Receivables, group companies		17,095	15,969	17,033
Other assets		165	254	179
Cash and bank		0	0	0
Total			21,347 20,310 21,299
Shareholders' equity		3,376	3,041	3,928
Derivatives		508	954	574
Interest bearing liabilities		15,531	14,313	14,719
Interest bearing liabilities,
group companies		1,752	1,815	1,921
Other liabilities		180	187	157
Total			21,347 20,310 21,299
Pledged assets (receivables
group companies)		16,103	14,674	14,721
Contingent liabilities (guaranteed
commitments for subsidiaries)		1,062	1,362	1,062

Signing of the Report

The Board of Directors and the Chief Executive Offi cer assure that the Half-year Report provide a fair view of the parent company's and the Group's operations, fi nancial position and result as well as describes signifi cant risks and uncertainties that the parent company and the companies included in the Group are faced with.

Gothenburg July 12 2011

Jan Kvarnström Per Berggren Marianne Dicander Chairman Board member Alexandersson

Ulla-Britt Fräjdin-Hellqvist Christer Jacobson Board member Board member

Board member CEO

Board member

Johan Skoglund Håkan Hellström

Auditors' Report

Independent Auditors' Report on Review of Half-year Financial Information.

To the Board of Directors of Castellum AB

Corporate indetity number: 556475-5550

Introduction

We have reviewed the half-year report for Castellum AB (publ), corporate identity number 556475-5550, for the period January 1 – June 30, 2011. The Board and the Managing Director are responsible for the preparation and presentation of this half-year report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this half-yearly report based on our review.

Scope of Review

We conducted our review in accordance with the Standard on Review Engagements SÖG 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by FAR. A review of interim fi nancial information consists of making inquiries, primarily of persons responsible for fi nancial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with ISA and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all signifi cant matters that might be identifi ed in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying half-year report is not prepared, in all material respects, in accordance with IAS 34 and the Annual Accounts Act.

Gothenburg 12 July 2011

Authorized Public Authorized Public Accountant Accountant

Carl Lindgren Magnus Fredmer

The Castellum Share

The Castellum share is listed on NASDAQ OMX Stockholm AB Large Cap. At the end of the year the company had about 9 900 shareholders. Shareholders registered abroad cannot be broken down in terms of directly held and nominee registered shares except for one foreign shareholder who has fl agged for holding over 5%, Stichting Pensioensfonds ABP. Castellum has no direct registered shareholders with holdings exceeding 10%. The ten single largest Swedish shareholders can be seen in the table below.

Shareholders on 30-06-2011	Number of shares thousand	Percentage of voting rights and capital
AFA Sjukförsäkrings AB	6,869	4.2%
László Szombatfalvy	5,000	3.0%
Magdalena Szombatfalvy	4,935	3.0%
AMF Pensionsförsäkrings AB	4,260	2.6%
Skandinaviska Enskilda Banken AB	2,467	1.5%
Handelsbanken	2,108	1.3%
Andra AP-fonden	2,003	1.2%
Lannebo Småbolag	1,757	1.1%
Tredje AP-fonden	1,413	0.9%
Länsförsäkringar Fastighetsfond	1,400	0.8%
Other shareholders registered in Sweden	45,891	28.0%
Shareholders registered abroad	85,897	52.4%
Total outstanding shares	164,000	100%
Repurchased shares	8,007
Total registered shares	172,007

There is no potential common stock (eg. convertibles.)

Distribution of shareholders by country 30-06-2011

The Castellum share price as at 30 June, 2011 was SEK 94.80 (71.10) equivalent to a market capitalization of SEK 15.5 billion (11.7), calculated on the number of outstanding shares.

During the period a total of 68 million (77) shares were traded, equivalent to an average of 551,000 shares (627,000) per day, corresponding on an annual basis to a turnover rate of 85% (96%).

Growth, yield and financial risk

During the last 12-month period the total yield of the Castellum share has been 38% (52%), including dividend of SEK 3.60 (3.50).

	1 year	3 years	10 years
		average/	average/
		year	year
Total yield of the share (incl. dividend)
Castellum	38%	22%	16%
NASDAQ OMX Stockholm (SIX Return)	17%	12%	7%
Real Estate Index Sweden (EPRA)	35%	21%	16%
Real Estate Index Europe (EPRA)	31%	3%	6%
Growth
Income from prop. management SEK/share	4%	7%	9%
Net income for the year after tax SEK/share	136%	35%	10%
Long term net asset value SEK/share	13%	3%	8%
Actual net asset value SEK/share	18%	2%	7%
Dividend SEK/share	3%	6%	10%
Real estate portfolio SEK/share	10%	5%	8%
Change in property value, unweighted	4%	0%	2%
Yield
Return on actual net asset value	22.7%	7.3%	12.3%
Return on total capital	9.7%	5.3%	7.8%
Financial risk
Interest coverage ratio	290%	289%	284%
Loan to value ratio	51%	51%	48%

Valuation - share price related key figures

Earnings Capacity

Income from property management after tax relating to income from property management (EPRA EPS) amounted on rolling annual basis to SEK 6.79 (6.77) which from the share price gives a yield of 7.2% (9.5%).

Net income after tax amounted on rolling annual basis to SEK 12.91 per share (5.46), which from the share price gives a yield of 13.6% (7.7%).

Net asset value

The long term net asset value (EPRA NAV) can be calculated to SEK 95 per share (92). The share price at the end of the period was thus 100% (99%) of the long term net asset value.

Share price/net asset value

Dividend Yield

The latest carried out dividend of SEK 3.60 (3.50) corresponds to a yield of 3.8% (4.9%) based on the share price at the end of the period.

The share's dividend yield

The Castellum share's price trend and turnover since IPO May 23, 1997 until June 30, 2011

Calendar

Interim Report January-September 2011 18 October, 2011, around 11 a m Year-end Report 2011 24 January, 2012 Annual general Meeting 22 March, 2012 Interim Report January-March 2012 17 April, 2012 Half-year Report January-June 2012 12 July, 2012 Interim Report January-September 2012 16 October, 2012 Year-end Report 2012 22 January, 2013 Annual General Meeting 21 March, 2013

For further information please contact Håkan Hellström, CEO, or Ulrika Danielsson, Finance Director, telephone +46 31-60 74 00 or visit Castellum's website.

www.castellum.se

On Castellum's website it is possible to download as well as subscribe to Castellum's Pressreleases and Interim Reports.

Subsidiaries

Aspholmen Fastigheter AB

Elementvägen 14, 702 27 Örebro Telephone +46 19-27 65 00 Telefax +46 19-27 65 19 orebro@aspholmenfastigheter.se www.aspholmenfastigheter.se

Fastighets AB Corallen

Lasarettsgatan 3, Box 148, 331 21 Värnamo Telephone +46 370-69 49 00 Telefax +46370-475 90 info@corallen.se www.corallen.se

Fastighets AB Brostaden

Bolidenvägen 14, Box 5013, 121 05 Johanneshov Telephone +46 8-602 33 00 Telefax +46 8-602 33 30 info@brostaden.se www.brostaden.se

Eklandia Fastighets AB

Theres Svenssons gata 9, Box 8725, 402 75 Göteborg Telephone +46 31-744 09 00 Telefax +46 31-744 09 50 info@eklandia.se www.eklandia.se

Fastighets AB Briggen

Fredriksbergsgatan 1, Box 3158, 200 22 Malmö Telephone +46 040-38 37 20 Telefax +46 40-38 37 37 fastighets.ab@briggen.se www.briggen.se

Harry Sjögren AB

Kråketorpsgatan 20, 431 53 Mölndal Telephone +46 31-706 65 00 Telefax +46 31-706 65 29 info@harrysjogren.se www.harrysjogren.se

In the event of confl ict in interpretation or differences between this report and the Swedish version, the latter will have priority.

CASTELLUM HALF-YEAR REPORT JANUARY-JUNE 2011 Castellum AB (publ) • Box 2269, SE-403 14 Gothenburg, Sweden • Visiting address Kaserntorget 5 Telephone +46 31-60 74 00 • Fax +46 31-13 17 55 • E-mail info@castellum.se • www.castellum.se Org nr 556475-5550