Castellum — Interim / Quarterly Report 2011

Apr 19, 2011

In the area Västra Hamnen, Malmö, Castellum has started a new construction of approx 5,800 sq.m. offi ce premises.

Interim Report January-March 2011

Interim Report January-March 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 32 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-March 2011 amounted to SEKm 717 (SEKm 674 corresponding period previous year).
• Income from property management improved by 6% to SEKm 250 (234), corresponding to SEK 1.52 (1.43) per share.
• Changes in value on properties amounted to SEKm 97 (46) and on interest rate derivatives to SEKm 171 (–53).
• Net income after tax for the period amounted to SEKm 394 (173), corresponding to SEK 2.40 (1.05) per share.
• Investments amounted to SEKm 522 (255) of which SEKm 244 (172) were new constructions, extensions and reconstructions and SEKm 278 (83) were acquisitions.

	2011 Jan-March	2010 Jan-March	2010	2009	2008	2007	2006	2005	2004	2003	2002
Income from property management, SEK/share	1.52	1.43	6.96	6.89	5.93	5.63	5.38	5.00	4.52	4.07	3.77
Change previous year	+6%	–11%	+1%	+16%	+5%	+5%	+8%	+11%	+11%	+8%	+14%
Net income after tax, SEK/share	2.40	1.05	11.98	0.98	– 4.04	9.07	10.21	7.89	5.59	2.68	4.00
Change previous year	+129%		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	32,284	29,511		31,768 29,267	29,165	27,717	24,238	21,270	19,449	18,015 17,348
Investments, SEKm	522	255	1,506	1,165	2,738	2,598	2,283	1,357	1,268	1,108	1,050
Loan to value	51%	51%	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, investments of at least SEKm 1,000 per year will be made. 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 60% of income from property management after full tax deduction will be distributed, however investment plans, consolidation needs, liquidity and fi nancial position in general will be taken into account.

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, 3-5 market areas, business developers and 3-4 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.

Örebro, Uppsala Greater Stockholm and Västerås

Malmö, Lund, Helsingborg and Copenhagen

Central, Northern and Eastern Gothenburg Jönköping, Linköping, Värnamo and Växjö

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 250 (234), equivalent to SEK 1.52 (1.43) per share - an increase with 6%. Income from property management rolling four quarters amounted to SEKm 1,157 (1,102) equivalent to SEK 7.05 per share (6.72), an increase with 5%.

During the period, changes in value on properties amounted to SEKm 97 (46) and on interest rate derivatives to SEKm 171 (–53). Net income for the period was SEKm 394 (173), equivalent to SEK 2.40 (1.05) per share.

Rental income

Group rental income amounted to SEKm 717 (674). For offi ce and retail properties, the average contracted rental level, including charged heating, cooling and property tax, amounted to SEK 1,222 per sq.m., whereas it for warehouse and industrial properties amounted to SEK 719 per sq.m. Rental levels, which are considered to be in line with the market, have increased by approx. 1.5% in comparable portfolio compared with previous year.

The average economic occupancy rate was 88.7%.

The total annual rental value for vacant premises on yearly basis amounted to approx. SEKm 396.

The gross leasing (i.e. the annual value of total leasing) during the period was SEKm 75 (69), of which SEKm 12 (10) were leasing on new constructions, extensions and reconstructions. Notices of termination amounted to SEKm 54 (67), of which bankruptcies were SEKm 4 (3), hence net leasing for the year were SEKm 21 (2). The time difference between reported net leasing and the effect in income thereof is estimated to between 9-18 months.

Net leasing

The improvement in the rental market in terms of both demand and new leases follows the growth in the Swedish economy and the improved employment in particular. 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.

Property costs

Property costs amounted to SEKm 288 (280) corresponding to SEK 352 per sq.m. (352). The costs for heating during the period has been calculated to 103% (117%) of a normal year according to the degree day statistics.

Property costs, SEK/sq.m.	Offi ce/	Warehouse/
	Retail	Industrial	Total
Operating expenses	266	174	223
Maintenance	36	19	29
Ground rent	8	6	7
Real estate tax	66	17	43
Direct property costs	376	216	302
Leasing and property administration (indirect)	–	–	50
Total	376	216	352
Previous year	378	226	352

Central administrative expenses

Central administrative expenses were SEKm 20 (17). This includes costs for a profi t and share price related incentive plan for 10 persons in executive management of SEKm 4 (3).

Net interest rate

Net interest items were SEKm –159 (–143). The average interest rate level was 4.0% (3.8%).

Changes in value

In the Swedish property market the transaction volume during the fi rst quarter for larger transactions amounted to approx. SEK 19 billion, which is slightly higher then the corresponding period previous year. The transactions have been spread among many different buyers and property types. The continued high demand has led to stable property prices.

Castellum has not changed the required yield in the internal valuations during the period. The change in value in Castellum's portfolio amounted to SEKm 97 (46) of which SEKm 70 mainly relates to acquisitions and project gains while the remaining SEKm 27 relates to sales of three properties where the sale price of SEKm 103 exceeded the valuations with 36%.

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. The value has changed, due to changes in long term market interest rates and the time factor, with SEKm 171 (–53) and the value was SEKm –403 (–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 1,201 (1,406). The properties' fair value exceed their fi scal value by SEKm 15,127 (14,829) of which SEKm 163 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 3,620 (3,502).

Castellum has no ongoing formal tax disputes.

Tax Calculation 31-03-2011	Basis	Basis
	current tax	deferred
SEKm		tax
Income from property management	250
Deductions for tax purposes
depreciations	– 160	160
reconstructions	– 59	59
Other tax allowances	3	– 10
Taxable income from property management	34	209
Properties sold	5	– 15
Changes in value on properties	–	70
Changes in value on interest rate derivatives	171	–
Taxable income before tax loss carry forwards	210	264
Tax loss carry forwards, opening balance	– 1,406	1,406
Tax loss carry forwards, closing balance	1,201	– 1,201
Taxable income	5	469
Of which 26.3% current/deferred tax	– 1	– 123

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 end of the period aquired a property in Denmark, implying that effects of exchange are accounted for in other total income. 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 780,000 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	278	4
+ New constructions, extensions and reconstructions	244	–
– Sales	– 76	– 3
+/– Unrealized changes in value	70	–
Real estate portfolio on 31 March, 2011	32,284	599

During the period investments totalling SEKm 522 (255) were made, of which SEKm 244 (172) where new constructions, extensions and reconstructions and SEKm 278 (83) were acquisitions. Of the total investments SEKm 311 related to Greater Gothenburg, SEKm 86 to the Öresund Region, SEKm 61 to Mälardalen, SEKm 39 to the Greater Stockholm and SEKm 25 to Eastern Götaland.

Following sales of SEKm 103 (57) the net investments amounted to SEKm 419 (198).

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 970 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 32,284 (31,768), corresponding to SEK 9,621 per sq.m.

Average valuation yield

(excl. project/land and building rights)	SEKm
Net operating income properties	469
+ Real occupancy rate, 94% at the lowest	61
+/- Property costs to a normal year	39
– Property administration, 30 SEK/sq.m.	– 25
Normalized net operating income	544
Valuation (excl. building rights of SEKm 496)	30,820
Average valuation yield	7,1%

Average valuation yield over time

Larger investments and sales

Lager projects Property	Area sq.m.	Econ. occup. rate, March 2011	SEKm	Total inv., Remain. inv SEKm	Completed	Comment
Forskaren 2, Lund	7,600	10%	150	123	Q 4 2012	New construction offi ce premises
Fullriggaren 4, Malmö	5,800	0%	149	122	Q 4 2012	New construction offi ce premises
Gården 15, Linköping	10,000	20%	106	96	Q 1 2013	New construction offi ce/retail/warehouse
Boländerna 30:2, Uppsala	14,000	55%	64	18	Q 1 2012	Reconstruction and new construction retail premises
Saltmossen 3, Botkyrka	5,300	50%	45	37	Q 4 2011	New construction warehouse premises
Kärra 72:36, Gothenburg	6,450	100%	39	11	Q 3 2011	New construction warehouse/logistic premises
Larger acquisitions during 2011 Property	Area sq.m.	Econ. occup. Acquisitions rate, March 2011	SEKm		Access	Category
Lundbyvassen 3:1, Gothenburg	10,800	100%	183		April 2011	Offi ce
Roskildevej 22, Copenhagen, Denmark	8,500	100%	50		April 2011	Offi ce
Part of Lindholmen 735:491, Gothenburg	–	–	35		June 2011	Land acquisition, building right 11,500 sq.m.
Larger sales during 2011 Property	Area, q.m		Sales prices SEKm		Access	Category

Castellum's real estate portfolio 31-03-2011

			31-03-2011					January-March 2011
	No. of	Area thous.	Property value	Property value	Rental value	Rental value	Economic occupancy	Rental income	Property costs	Property costs	Net operating income
Offi ce/retail	properties	sq.m.	SEKm	SEK/sq.m.	SEKm	SEK/sq.m.	rate	SEKm	SEKm	SEK/sq.m.	SEKm
Greater Gothenburg	76	407	5,769	14,183	131	1,290	94.8%	124	37	368	87
Öresund Region	53	332	4,983	15,024	116	1,400	86.7%	101	32	380	69
Greater Stockholm	49	339	4,215	12,414	114	1,343	77.6%	88	35	411	53
Mälardalen	74	361	3,634	10,077	97	1,075	92.4%	90	32	353	58
Eastern Götaland	52	319	2,906	9,098	79	991	89.2%	70	29	370	41
Total offi ce/retail	304	1,758	21,507	12,234	537	1,222	88.2%	473	165	376	308
Warehouse/industrial
Greater Gothenburg	100	647	4,594	7,105	117	726	92.3%	108	33	208	75
Öresund Region	41	298	1,724	5,790	53	708	82.9%	44	15	199	29
Greater Stockholm	41	210	1,839	8,762	48	914	92.2%	44	16	299	28
Mälardalen	38	158	915	5,778	28	707	93.0%	26	9	226	17
Eastern Götaland	34	184	737	3,996	23	502	85.1%	20	8	172	12
Total warehouse/industrial	254	1,497	9,809	6,553	269	719	89.9%	242	81	216	161
Total	558	3,255	31,316	9,621	806	991	88.7%	715	246	302	469
Leasing and property administration									41	50	– 41
Total after leasing and property administration									287	352	428
Development projects	12	57	639	–	15	–	–	7	3	–	4
Undeveloped land	29	–	329	–	–	–	–	–	–	–	–
Total	599	3,312	32,284	–	821	–	–	722	290	–	432

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 432 accounted for above and the net operating income of SEKm 429 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 4 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-March	2010 Jan-March	2010 Jan-Dec
Rental value, SEK/sq.m.	991	967	974
Economic occupancy rate	88.7%	88.4%	89.0%
Property costs, SEK/sq.m.	352	352	298
Net operating income, SEK/sq.m.	527	503	569
Property value, SEK/sq.m.	9,621	9,010	9,499
Number of properties	599	587	598
Lettable area, thousand sq.m.	3,312	3,215	3,311

		Rental income		Income from property management
SEKm	2011 Jan-March	2010 Jan-March	2011 Jan-March	2010 Jan-March
Greater Gothenburg	229	223	95	93
Öresund Region	143	141	56	54
Greater Stockholm	135	121	43	40
Mälardalen	120	105	37	31
Eastern Götaland	90	84	27	23
Total	717	674	258	241

The discrepancy between the income from property management of SEKm 258 (241) above and the groups accounted income before tax of SEKm 518 (227) consists of unallocated income from property management of SEKm –8 (–7), changes in property value of SEKm 97 (46) and changes in values of interest rate derivatives of SEKm 171 (–53).

Financing

Financing 31-03-2011

Shareholders' equity and net asset value

The net asset value can be calculated as follows.

Net asset value
		SEKm SEK/share
Equity according to the balance sheet	10,886	66
Reversed
Interest rate derivatives acc to balance sheet	403	3
Deferred tax acc to balance sheet	3,620	22
Long term net asset value (EPRA NAV)	14,909	91
Deduction
Interest rate derivatives as above	– 403	– 3
Estimated real liability, deferred tax 5%	– 696	– 4
Actual net asset value (EPRA NNNAV)	13,810	84

Interest-bearing liabilities

The beginning of the year was characterized by increased both short and long term interest rates. The outlook for the Swedish economy is very good, which made the Riksbank increase the repo rate from 1.25% to 1.50%. The market expects the Riksbank to continue increasing the interest rate to a repo rate of 2.25-2.50% at the end of 2011. The availability to and price of credits could for Castellum be described as stable.

Loan maturity structure

During the period Castellum has signed new agreements of SEKm 500 and renegotiated agreements of SEKm 1,500. As of 31 March, 2011 Castellum had long term binding credit agreements totalling SEKm 18,562 (18,062), long term bonds totalling SEKm 200 (200), 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 113 (12), net interest bearing liabilities were SEKm 16,257 (15,769), of which SEKm 1,708 (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. Bonds and in cases when there are outstanding commercial papers theese 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 257%.

The average duration of Castellum's long term credit agreements was 4.9 years (5.0). Margins and fees on long term credit agreements had an average duration on 2.5 years (2.6).

Loan maturity structure 31-03-2011
Long term, SEKm	Credit agreements	Utilized
1 - 2 years	200	–
2 - 3 years	4,000	4,000
3 - 4 years	2,500	1,000
4 - 5 years	4,800	2,900
> 5 years	7,062	6,562
Total long term credit agreements	18,562	14,462
Total short term credit agreements (0-1 year)	2,328	1,795
Total credit agreements	20,890	16,257
Unutilized credit in long term credit agreements

Interest rate maturity structure

The average effective interest rate as of 31 March, 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 2.4 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 31-03-2011
Interest rate
	Loan	derivatives		Average
	SEKm	SEKm	Net, SEKm	interest rate
0 - 1 year	16,257	– 9,300	6,957	3.5%
1 - 2 years	–	800	800	3.9%
2 - 3 years	–	2,900	2,900	4.6%
3 - 4 years	–	800	800	4.2%
4 - 5 years	–	2,200	2,200	4.5%
5 - 10 years	–	2,600	2,600	4.7%
Total	16,257	–	16,257	4.1%

Interest rate derivatives

According to the accounting standard IAS 39 interest rate derivatives are subject to market valuation, which 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, should be accounted for in the income statement.

As of 31 March, 2011, the market value of the interest rate derivative portfolio amounted to SEKm –403 (–574).

Opportunities and Risks

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	–11/+11	–	0
Interest costs	–65/+65	–	+

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 – 6,457		– 3,228	0	3,228	6,457
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	2010
SEKm	Jan-March	Jan-March	Jan-Dec
Income	4	4	15
Operating expenses	– 13	– 12	– 59
Net fi nancial items	1	1	12
Dividend	–	–	658
Changes in value, interest
rate derivatives	171	– 53	291
Income before tax	163	– 60	917
Tax	– 43	15	– 69
Net income for the period	120	– 45	848
Balance sheet	31 March	31 March	31 Dec
SEKm	2011	2010	2010
Participations in group companies	4,087	4,087	4,087
Receivables, group companies	16,530	16,021	17,033
Other assets	135	243	179
Cash and bank	0	0	0
Total	20,752		20,351 21,299
Shareholders' equity	3,458	3,072	3,928
Interest rate derivatives	403	918	574
Interest bearing liabilities	15,250	13,698	14,719
Interest bearing liabilities, group companies	1,444	1,884	1,921
Other liabilities	197	779	157
Total	20,752		20,351 21,299
Pledged assets (receivables
group companies)	14,644	14,816	14,721
Contingent liabilities (guaranteed commitments for subsidiaries)	1,062	1,362	1,062

Annual General Meeting

At the Annual General Meeting on March 24, 2011 decisions were i. e. made on;

• a dividend of SEK 3.60 per share,
• re-election of members of the Board Jan Kvarnström, Per Berggren, Marianne Dicander Alexandersson, Ulla-Britt Fräjdin-Hellqvist, Christer Jacobsson and Johan Skoglund and that remuneration to the Board of Directors should be SEK 1,700,000,
• a renewed mandate for the Board to decide on purchase and transfer of the company's own shares.

Gothenburg 19 April, 2011 Håkan Hellström

Chief Executive Offi cer

This Interim Report has not been examined by the company's auditors.

Consolidated statement of Comprehensive Income
	2011	2010	Rolling 4 quarters	2010
SEKm	Jan - March	Jan - March	April 10 - March 11	Jan - Dec
Rental income	717	674	2,802	2,759
Operating expenses	– 182	– 186	– 543	– 547
Maintenance	– 24	– 23	– 106	– 105
Ground rent	– 6	– 3	– 22	– 19
Real estate tax	– 35	– 32	– 143	– 140
Leasing and property administration	– 41	– 36	– 154	– 149
Net operating income	429	394	1,834	1,799
Central administrative expenses	– 20	– 17	– 87	– 84
Net interest rates	– 159	– 143	– 590	– 574
Income from property management	250	234	1,157	1,141
Changes in value
Properties	97	46	1,273	1,222
Interest rate derivatives	171	– 53	515	291
Income before tax	518	227	2,945	2,654
Current tax	– 1	– 2	– 4	– 5
Deferred tax	– 123	– 52	– 756	– 685
Net income for the period/year	394	173	2,185	1,964
Other total net income
Translation of currencies	0	–	0	–
Total net income for the period/year	394	173	2,185	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	Rolling 4 quarters	2010
	Jan - March	Jan - March	April 10 - March 11	Jan - Dec
Average number of shares, thousand	164,000	164,000	164,000	164,000
Income from property management, SEK	1.52	1.43	7.05	6.96
Income from property management after tax (EPRA EPS*), SEK	1.47	1.40	6.69	6.62
Earnings after tax, SEK	2.40	1.05	13.32	11.98
Outstanding number of shares, thousand	164,000	164,000	164,000	164,000
Property value of properties, SEK	197	180	197	194
Long term net asset value (EPRA NAV*), SEK	91	80	94	92
Actual net asset value (EPRA NNNAV*), SEK	84	71	84	85

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

Financial Key Ratios
	2011	2010	Rolling 4 quarters	2010
	Jan - March	Jan - March	April 10 - March 11	Jan - Dec
Net operating income margin	60%	58%	65%	65%
Interest coverage ratio	257%	264%	296%	299%
Return on actual net asset value	14.3%	7.3%	24.6%	21.5%
Return on total capital	6.3%	5.7%	9.9%	9.8%
Investments, SEKm	522	255	1,773	1,506
Loan to value ratio	51%	51%	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	31 March 2011	31 March 2011	31 Dec 2010
Assets
Investment properties	32,284	29,511	31,768
Other fi xed assets	15	15	15
Current receivables	177	119	141
Cash and bank	113	12	12
Total assets	32,589	29,657	31,936
Shareholders' equity and liabilities
Shareholders' equity	10,886	9,291	11,082
Deferred tax liability	3,620	2,875	3,502
Interest rate derivatives	403	918	574
Long term interest-bearing liabilities	16,370	15,073	15,781
Non interest-bearing liabilities	1,310	1,500	997
Total shareholders' equity and liabilities	32,589	29,657	31,936
Pledged assets (property mortgages)	17,353	17,846	17,421
Contingent liabilities	–	–	–

Changes in Equity

	Number of outstanding shares,		Other capital	Retained
SEKm	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
Net income January-March 2010	–	–	–	173	173
Shareholders' equity 31-03-2010	164,000	86	4,096	5,109	9,291
Net income April-December 2010	–	–	–	1,791	1,791
Shareholders' equity 31-12-2010	164,000	86	4,096	6,900	11,082
Dividend, March 2011	–	–	–	– 590	– 590
Total net income January-March 2011	–	–	–	394	394
Shareholders' equity 31-31-2011	164,000	86	4,096	6,704	10,886

Cash Flow Statement

SEKm	2011 Jan - March	2010 Jan - March	Rolling 4 quarters April 10 - March 11	2010 Jan - Dec
Net operating income	429	394	1,834	1,799
Central administrative expenses	– 20	– 17	– 87	– 84
Reversed depreciations	1	2	5	6
Net interest rates paid	– 116	– 107	– 604	– 595
Tax paid	– 6	– 3	– 12	– 9
Cash fl ow from operating activities before change in working capital	288	269	1,136	1,117
Change in current receivables	– 9	40	– 37	12
Change in current liabilities	142	90	136	84
Cash fl ow from operating activities	421	399	1,235	1,213
Investments in new construction, refurbishments and extensions	– 244	– 172	– 953	– 881
Property acquisitions	– 278	– 83	– 820	– 625
Change in liabilities at acquisitions of property	133	0	270	137
Property sales	98	54	263	219
Change in receivables at sales of property	– 27	27	– 22	32
Other net investments	– 1	0	– 5	– 4
Cash fl ow from investment activities	– 319	– 174	– 1,267	– 1,122
Change in long term liabilities	589	– 221	1,297	487
Dividend paid	– 590	–	– 1,164	– 574
Cash fl ow from investment activities	– 1	– 221	133	– 87
Cash fl ow for the period/year	101	4	101	4
Cash and bank, opening balance	12	8	12	8
Cash and bank closing balance	113	12	113	12

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 10,200 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

Shareholders on 31-03-2011	Number of shares thousand	Percentage of voting rights and capital
AFA Sjukförsäkrings AB	7,018	4.3%
László Szombatfalvy	5,000	3.0%
Magdalena Szombatfalvy	4,935	3.0%
AMF Pensionsförsäkrings AB	4,790	2.9%
Skandinaviska Enskilda Banken AB	4,295	2.6%
Handelsbanken	3,885	2.4%
Andra AP-fonden	2,245	1.4%
Lannebo Småbolag	2,200	1.3%
Tredje AP-fonden	2,120	1.3%
Länsförsäkringar Fastighetsfond	2,112	1.3%
Other shareholders registered in Sweden	51,187	31.2%
Shareholders registered abroad	74,213	45.3%
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 31-03-2011

largest Swedish shareholders can be seen in the table below. The Castellum share price as at 31 March, 2011 was SEK 91.80 (72.75) equivalent to a market capitalization of SEK 15.1 billion (11.9), calculated on the number of outstanding shares.

During the period a total of 38 million (40) shares were traded, equivalent to an average of 599,000 shares (639,000) per day, corresponding on an annual basis to a turnover rate of 92% (98%).

Growth, yield and financial risk

During the last 12-month period the total yield of the Castellum share has been 31% (65%), including dividend of SEK 3.60 (3.50).

Total yield of the share (incl. dividend)		3 years	10 years
		1 year average/yearaverage/year
Castellum	31%	12%	17%
NASDAQ OMX Stockholm (SIX Return)	16%	10%	8%
Real Estate Index Sweden (EPRA)	31%	11%	16%
Real Estate Index Europe (EPRA)	16%	– 5%	6%

The Castellum share's price trend and turnover since IPO May 23, 1997 until March 31, 2011

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 6.69 (6.79) which from the share price gives a yield of 7.3% (9.3%).

Net income after tax amounted on rolling annual basis to SEK 13.32 per share (3.11), which from the share price gives a yield of 14.5% (4.3%).

Yield earnings per share

Net asset value

The long term net asset value (EPRA NAV) can be calculated to SEKm 14,909 (15,158) corresponding to SEK 91 per share (92). The share price at the end of the period was thus 101% (91%) of the long term net asset value.

Share price/net asset value

Dividend Yield

The proposed dividend of SEK 3.60 (3.50) corresponds to a yield of 3.9% (4.8%) based on the share price at the end of the period.

Calendar

Half-year Report January-June 2011 12 July, 2011, around 11 am Interim Report January-September 2011 18 October, 2011 Year-end Report 2011 24 January, 2012 Annual general Meeting 22 March, 2012

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 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

CASTELLUM INTERIM REPORT JANUARY-MARCH 2011