Castellum — Interim / Quarterly Report 2012

Apr 17, 2012

Interim Report January-March 2012

Interim Report January-March 2012

Castellum is one of the major listed real estate companies in Sweden. The fair value of the real estate portfolio amounts to SEK 34 billion, and comprises of commercial properties.

The real estate portfolio is owned and managed by six wholly owned subsidiaries with strong local roots in five growth regions: Greater Gothenburg (incl. Borås and Halmstad), 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 2012 amounted to SEKm 753 (SEKm 717 corresponding period previous year).
• Income from property management amounted to SEKm 273 (250), corresponding to SEK 1.66 (1.52) per share, an increase of 9%.
• Changes in value on properties amounted to SEKm 10 (97) and on interest rate derivatives to SEKm 206 (171).
• Net income after tax for the period amounted to SEKm 362 (394), corresponding to SEK 2.21 (2.40) per share.
• Net investments amounted to SEKm 323 (419) of which SEKm 307 (244) were new constructions, extensions and reconstructions.

	2012 Jan-March	2011 Jan-March	2011	2010	2009	2008	2007	2006	2005	2004	2003
Income from property management, SEK/share	1.66	1.52	7.15	6.96	6.89	5.93	5.63	5.38	5.00	4.52	4.07
Change previous year	+9%	+6%	+3%	+1%	+16%	+5%	+5%	+8%	+11%	+11%	+8%
Net income after tax, SEK/share	2.21	2,40	4,34	11.98	0.98	– 4.04	9.07	10.21	7.89	5.59	2.68
Change previous year	–8%	+129%	–64%	+1,122%	pos.	neg.	–11%	+29%	+41%	+108%	–33%
Dividend, SEK/share			3.70	3.60	3.50	3.15	3.00	2.85	2.62	2.38	2.13
Change previous year			+3%	+3%	+11%	+5%	+5%	+9%	+11%	+12%	+13%
Property value, SEKm	34,200	32,284 33,867			31,768 29,267	29,165	27,717	24,238	21,270	19,449	18,015
Net investments, SEKm	323	419	1,908	1,279	1,129	2,710	2,559	1,823	889	774	711
Loan to value	52%	51%	51%	50%	52%	50%	45%	45%	45%	45%	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 provides the preconditions for robust growth in the company, and offers 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. At the moment, this is equivalent to approx. SEKm 1,700. 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 for adjusting the company's capital structure to the company's capital need and as payment or funding of real estate investments. Company-owned shares may not be traded for short term purpose of capital gain.

Dividend

At least 50% of pre-tax property management income 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 on the company's share relative to risk and also strive for high liquidity. However, all actions will be made from a long-term perspective and the company will hold frequent, open and fair reports to shareholders, the capital and credit markets and the media, without disclosing any individual business relationship.

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. 4,600 commercial contracts, with good risk exposure regarding 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.

It is important that Castellum meets customers expectations. To follow up and evaluate efforts, an external customer survey is carried out annually, Satisfi ed Customer Index. The latest survey, that included offi ces, warehouses, industry and retail, continues to show consistently high marks for Castellum.

Commercial leases

Commercial leases are signed for a specifi ed 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. Leases may also contain additions for the tenant's share of the property's total heating, cooling and property-tax costs.

Subsidiaries with strong brands

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 forge close relationships with customers and develop thorough knowledge of the market situation and rental development within each market area. Property management is mainly carried out by Castellum personel.

and Västerås

Malmö, Lund, Helsingborg and Copenhagen Örebro, Uppsala Greater Stockholm

Jönköping, Linköping, Värnamo and Växjö

each property.

The fl at organization provides a short decision-making process and creates a customer oriented and active organization. Castellum measures and compares subsidiary management effi ciency and asset value growth in the real estate portfolio. Within the Group, experiences are shared among companies and specialist expertise can therefore be made available to

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

Employee viewpoints on Castellum are monitored regularly and surveys show that employees enjoy their working situation and have high confi dence in the company and its

Since 1995, Castellum has been consciously working with sustainability, i.e., developing the properties in those cities where the subsidiaries are present, creating a common set of values for actions towards employees, customers and vendors as well as actively working with environmental issues. The environmental work is focused on effi cient energyconsumption and improving the environmental status of

The group has approx. 240 employees.

the whole organization.

personnel, etc.

management.

Responsible business

Southern and Eastern Greater Gothenburg, Borås and Halmstad

Cash fl ow focus

• An annual growth in cash fl ow, i.e. income from property management per share, of at least 10% - Investments of at least 5% of the property value yearly

Commercial properties in growth regions

• Concentrated to 15 growth regions
• Premises for offi ce/retail and warehouse/industrial
• One of the three largest real estate owners in each local market

Castellums' 4 corner stones

Customer focus through local organizations - Decentralized and small-scale organization

• Property management carried out with own personnel - Regulary measurement of customers and employees
• satisfaction
• Environmental work with focus on reduced energy consumption

Strong balance sheet and low fi nancial risk

• Loan to value ratio not permanently exceeding 55%
• Interest coverage ratio at least 200%

• Geographic exposure allocated on different types of premises

• Commercial contracts in many fi elds of industry

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 comparisons 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 for the period January-March 2012 to SEKm 273 (250), equivalent to SEK 1.66 (1.52) per share - an increase of 9%. Income from property management rolling four quarters amounted to SEKm 1,196 (1,157) equivalent to SEK 7.29 per share (7.05) - an increase of 3%.

Income from Property Management per share Net leasing

During the period, changes in value on properties amounted to SEKm 10 (97) and on interest rate derivatives to SEKm 206 (171). Net income for the period was SEKm 362 (394), equivalent to SEK 2.21 (2.40) per share.

Rental income

Group rental income amounted to SEKm 753 (717). For offi ce and retail properties, the average contracted rental level, including charged heating, cooling and property tax, amounted to SEK 1,240 per sq.m., whereas for warehouse and industrial properties, it amounted to SEK 735 per sq.m. Rental levels, which are considered to be in line with the market, have increased by 2% in comparable portfolio compared with previous year, which is mainly an effect of index clause adjustments.

The average economic occupancy rate was 88.5% (88.7%).

Rental value and economic occupancy rate

The total annual rental value for vacant premises on yearly basis amounted to approx. SEKm 424 (396).

Gross leasing (i.e. the annual value of total leasing) during the period was SEKm 73 (75), of which SEKm 10 (12) was leasing of new constructions, extensions and reconstructions. Notices of termination amounted to SEKm 81 (54), of which bankruptcies were SEKm 6 (4) and SEKm 14 (1) were notices of termination with at least 18 months remaining length of contract. Hence net leasing for the year was SEKm –8 (21). The time difference between reported net leasing and the effect in income thereof is estimated to between 9-18 months.

The rental market shows the same pattern as for year-end 2011, indicating continued strong demand even if some measure of slowdown has been noted compared with autumn of 2011. Notices of terminations have increased, and the trend over the past quarters has been that more customers terminating contracts earlier and earlier, relative to expiration dates. This has resulted in a correspondingly longer time for new leases to be carried through. The pattern is the same for all Castellum submarkets and property types.

Rental levels are expected to remain stable.

Property costs

Property costs amounted to SEKm 284 (288) corresponding to SEK 335 per sq.m. (352) – a decrease with 5%. Costs for heating during the period has been calculated to 94% (103%) of a normal year according to the degree day statistics.

Property costs, SEK/sq.m.

	Offi ce/	Warehouse/
	Retail	Industrial	Total
Operating expenses	235	154	198
Maintenance	42	20	32
Ground rent	7	7	7
Real estate tax	67	17	45
Direct property costs	351	198	282
Leasing and property administration (indirect)	–	–	53
Total	351	198	335
Previous year	376	216	352

Central administrative expenses

Central administrative expenses totalled SEKm 23 (20). This includes costs for a profi t-and-share-price related incentive plan for 10 persons in executive management of SEKm 3 (4).

Net interest rate

Net interest items were SEKm –173 (–159). The average interest rate level was 4.1% (4.0%).

Interest rate levels

Changes in value

During the fi rst quarter, the transaction volume in the Swedish real estate market totalled SEK 25 billion - hence exceeding the corresponding period last year by SEK 6 billion. Residential accounted for approx. 40% (25%) of the volume, and domestic buyers for around 70% (80%). Some slowdown in transaction intensity can be noted as the number of transactions has decreased. The price level for properties is considered stable in all markets and for all segments.

The change in value in Castellum's portfolio during the period amounted to SEKm 10 (97). No general change in the required yield in the internal valuations has been made during the period. The change in value also covers SEKm 1 due to sales of 2 properties where the sales price of SEKm 8 exceeded the valuations by 14%.

Castellum utilizes interest rate derivatives 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 affecting changes in value are reported in the income statement. Note that interest rate derivatives used to achieve an interest rate maturity structure are subject to market valuation, which is normally not the case for credit margins or loans with fi xed interest rates. Castellum also has a few derivatives in order to hedge currency fl uctuation in the investment in Denmark. 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 value changes is accounted for in other total income.

The value in the derivatives portfolio has changed by SEKm 207 (171), mainly due to changes in long-term market interest rates and the value was SEKm –796 (–1,003) at the end of the period.

Tax

The nominal corporate tax rate in Sweden is 26.3%. Due to the possibility to deduct depreciation and reconstructions for tax purposes, and to utilize tax loss carryforwards, there are in principle no paid tax costs. Paid tax occurs because a few subsidiaries are not allowed to make fi scal group contributions.

Remaining tax loss carryforwards can be calculated to SEKm 1,524 (1,772). Fair values for the properties exceed their fi scal value by SEKm 16,429 (16,197) of which SEKm 309 relates to properties acquired and accounted for as asset acquisitions. As deferred tax liability, a full nominal 26.3% tax of the net difference is reported, reduced by the deferred tax relating to asset acquisitions, i.e., SEKm 3,839 (3,714).

Castellum has no ongoing formal tax disputes.

Tax Calculation 31-03-2012
	Basis	Basis
SEKm	current tax	deferred tax
Income from property management	273
Deductions for tax purposes
depreciations	– 159	159
reconstructions	– 57	57
Other tax allowances	– 10	5
Taxable income from property management	47	221
Properties sold	4	– 4
Changes in value on properties	–	9
Changes in value on interest rate derivatives	206	–
Taxable income before tax loss carry forwards	257	226
Tax loss carry forwards, opening balance	– 1,772	1,772
Tax loss carry forwards, closing balance	1,524	– 1,524
Taxable income	9	474
Of which 26.3% current/deferred tax	– 2	– 125

Accounting Principles

Castellum follows the EU-adopted IFRS standards and interpretations (IFRIC). This interim report has been prepared according to IAS 34 Interim Financial Reporting. Accounting principles and methods for calculations have otherwise remained unchanged compared with the Annual Report of the 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, which represents 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 adequate means of communication and services. The remaining 3% consist of projects and undeveloped land.

Castellum owns approx. 760,000 sq.m. of unutilized building rights and ongoing projects with remaining investments of approx. SEKm 1,100.

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, 2012	33,867	617
+ Acquisitions	24	1
+ New constructions, extensions and reconstructions	307	–
– Sales	– 7	– 2
+/– Unrealized changes in value	9	–
+/– Currency translation	0	–
Real estate portfolio on 31 March, 2012	34,200	616

During the period, investments totalling SEKm 331 (522) were made, of which SEKm 307 (244) were new constructions, extensions and reconstructions and SEKm 24 (278) were acquisitions. Of the total investments SEKm 92 related to Mälardalen, SEKm 79 to Greater Gothenburg, SEKm 79 to the Eastern Götaland, SEKm 41 to Greater Stockholm and SEKm 40 to Öresund Region.

Following sales of SEKm 8 (103) the net investments totalled SEKm 323 (419).

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 980 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 year-end. 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 34,200 (33,867), corresponding to SEK 9,903 per sq.m.

Average valuation yield
(excl. project/land and building rights)	SEKm
Net operating income properties	516
+ Real occupancy rate, 94% at the lowest	66
+/- Property cost annual rate	33
– Property administration, 30 SEK/sq.m.	– 25
Normalized net operating income (3 months)	590
Valuation (excl. building rights of SEKm 461)	32,838
Average valuation yield	7.2%

Average valuation yield over time

Larger investments

Larger projects Area, Econ. occup. Total inv., Remain. inv. Property sq.m April 2012 SEKm SEKm Completed Comment Ongoing projects Lindholmen 28:3, Gothenburg 10,500 0% 276 223 Q 1 2013 New construction offi ce premises Atollen, Jönköping 6,019 0% 169 135 Q 3 2013 New construction offi ce/retail/residential Fullriggaren 4, Malmö 5,400 0% 151 60 Q 1 2013 New construction offi ce premises Forskaren 2, Lund 9,000 15% 137 56 Q 1 2013 New construction offi ce premises Inköparen 1, Örebro 4,300 60% 68 39 Q 2 2013 New construction offi ce premises Trucken 4, Borås 9,200 100% 58 51 Q 4 2012 New construction warehouse Kärra 28:18, Gothenburg 5,440 100% 45 15 Q 2 2012 New construction warehouse Rosersberg 11:34, Sigtuna 4,080 0% 40 37 Q 4 2012 New construction warehouse/offi ce Elementet 4, Sollentuna 3,404 53% 31 10 Q 4 2012 New construction warehouse/logistic Projects completely / partly moved in Gården 15, Linköping 9,855 40% 106 32 Q 1 2013 New construction offi ce/retail/residential Larger acquisitions during 2012 Property Area, sq.m. Econ. occup. April 2012 Acquisition SEKm Access Category

Castellum's real estate portfolio 31-03-2012

			31-03-2012			January-March 2012
	No. of properties	Area thous. sq.m.	Property value SEKm	Property value SEK/sq.m.	Rental value SEKm	Rental value SEK/sq.m.	Economic occupancy rate	Rental income SEKm	Property costs SEKm	Property costs SEK/sq.m.	Net operating income SEKm
Offi ce/retail
Greater Gothenburg	78	423	6,024	14,252	137	1,294	93.7%	128	38	365	90
Öresund Region	59	355	5,287	14,887	123	1,385	84.9%	105	32	355	73
Greater Stockholm	51	340	4,341	12,774	117	1,372	77.6%	91	31	358	60
Mälardalen	79	400	4,303	10,747	111	1,115	91.8%	102	35	354	67
Eastern Götaland	52	320	3,006	9,403	82	1,022	88.4%	72	25	317	47
Total offi ce/retail	319	1,838	22,961	12,494	570	1,240	87.4%	498	161	351	337
Warehouse/industrial
Greater Gothenburg	101	658	4,897	7,438	121	736	94.0%	114	32	195	82
Öresund Region	41	297	1,760	5,936	53	711	85.7%	45	13	178	32
Greater Stockholm	43	222	1,992	8,954	52	948	91.9%	48	15	273	33
Mälardalen	39	163	944	5,793	30	729	91.1%	27	8	205	19
Eastern Götaland	34	184	745	4,041	24	518	83.2%	20	7	144	13
Total warehouse/industrial	258	1,524	10,338	6,780	280	735	90.8%	254	75	198	179
Total	577	3,362	33,299	9,903	850	1,011	88.5%	752	236	282	516
Leasing and property administration									45	53	– 45
Total after leasing and property administration									281	335	471
Development projects	12	51	601	–	10	–	–	2	3	–	– 1
Undeveloped land	27	–	300	–	–	–	–	–	–	–	–
Total	616	3,413	34,200	–	860	–	–	754	284	–	470

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 470 accounted for above and the net operating income of SEKm 469 in the income statement is explained by the deduction of the net operating income of SEKm 0 on properties sold during the period, as well as the adjustment of the net operating income of SEKm 1 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

	2012 Jan-March	2011 Jan-March	2011 Jan-Dec
Rental value, SEK/sq.m.	1,011	991	995
Economic occupancy rate	88.5%	88.7%	89.3%
Property costs, SEK/sq.m.	335	352	300
Net operating income, SEK/sq.m.	560	527	589
Property value, SEK/sq.m.	9,903	9,621	9,835
Number of properties	616	599	617
Lettable area, thousand sq.m.	3,413	3,312	3,411

		Rental income	Income from property management
	2012	2011	2012	2011
SEKm	Jan-March	Jan-March	Jan-March	Jan-March
Greater Gothenburg	243	229	100	95
Öresund Region	149	143	58	56
Greater Stockholm	139	135	50	43
Mälardalen	129	120	42	37
Eastern Götaland	93	90	31	27
Total	753	717	281	258

The discrepancy between the income from property management of SEKm 281 (258) above and the groups accounted income before tax of SEKm 489 (518) consists of unallocated income from property management of SEKm –8 (–8), changes in property value of SEKm 10 (97) and changes in values of interest rate derivatives of SEKm 206 (171).

Financing

Financing 31-03-2012

Shareholder equity and net asset value

The net asset value can be calculated as follows.

Net asset value 31-03-2012		SEKm SEK/share
Equity according to the balance sheet	10,958	67
Reversed
Derivatives according to balance sheet	796	5
Deferred tax according to balance sheet	3,839	23
Long term net asset value (EPRA NAV)	15,593	95
Deduction
Derivatives as above	– 796	– 5
Estimated real liability, deferred tax 5%	– 745	– 4
Actual net asset value (EPRA NNNAV)	14,052	86

Interest-bearing liabilities

The beginning of the year was marked by weak economic prospects in Sweden as a result of global economic development. For this reason, as well as low infl ation pressure, the Riksbank cut the repo rate by 0.25% to 1.50% in February. Long term interest rates have shown a mixed trend during this period, but at the end of the quarter a slight increase could be noted compared to the beginning of the year.

Generally speaking, access to credit is somewhat lower now than for the same period last year, whereas it is considered stable for Castellum's part.

Loan maturity structure

At the end of the period Castellum had long term binding credit agreements totalling SEKm 19,372 (19,374), short term binding credit agreements totalling SEKm 422 (420) and a commerial paper program of SEKm 4,000 (4,000). After deduction of liquid assets of SEKm 22 (97), net interest bearing liabilities were SEKm 17,817 (17,063), of which SEKm 2,392 (2,235) 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 tied up capital.

Long-term loan commitments 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 ls with comfortable margins, 52% and 258% respectively. The average duration of Castellum's long-term credit agreements was 4.9 years (5.1). Margins and fees on long-term credit agreements had an average duration of 3.2 years (3.5).

Loan maturity structure 31-03-2012
Long term, SEKm	Credit agreements	Utilized
1 - 2 years	207	7
2 - 3 years	2,007	1,307
3 - 4 years	5,307	3,457
4 - 5 years	4,007	4,007
> 5 years	7,844	6,644
Total long term credit agreements	19,372	15,422
Total short term credit agreements (0-1 year)	2,814	2,395
Total credit agreements	22,186	17,817
Unutilized credit in long term credit agreements

Interest rate maturity structure

The average effective interest rate as of 31 March, 2012 was 4.0% (4.0%). The market interest rate for an equal portfolio, regarding both current market rate and credit margin, can be assessed to 4.8% (4.7%). The average fi xed interest term on the same date was 2.6 years (2.7).

In order to secure a stable and low net cash fl ow of interest income/costs over time, Castellum has chosen a relatively long fi xed interest term by working with interest rate derivatives. Interest rate derivatives is a cost effective and fl exible way of extending loans with short term interest rates to achieve the desired fi xed interest term. In the interest rate maturity structure, interest rate derivatives are accounted for in the earliest time segment in which they can mature.

Credit margins are distributed in the interval of the underlying loans.

Interest rate maturity structure 31-03-2012
Interest rate
	Loan	derivatives		Average
	SEKm	SEKm	Net, SEKm	interest rate
0 - 1 year	17,817	– 9,300	8,517	3.9%
1 - 2 years	–	1,400	1,400	3.2%
2 - 3 years	–	500	500	3.5%
3 - 4 years	–	2,000	2,000	4.6%
4 - 5 years	–	1,900	1,900	4.4%
5 - 10 years	–	3,500	3,500	4.0%
Total	17,817	–	17,817	4.0%

Currency

Castellum has made investments in Denmark, which means that the Group is exposed to a currency risk. A currency translation risk is primarily related to when income statement and balance sheet in foreign exchange are translated into Swedish currency. In accordance with fi nancial policy, between 60-100% of investments in foreign subsidiaries are to be fi nanced in that country's currency.

Consolidated statement of Comprehensive Income
	2012	2011	Rolling 4 quarters	2011
SEKm	Jan - March	Jan - March	April 11 - March 12	Jan - Dec
Rental income	753	717	2,955	2,919
Operating expenses	– 168	– 182	– 539	– 553
Maintenance	– 27	– 24	– 118	– 115
Ground rent	– 6	– 6	– 24	– 24
Real estate tax	– 38	– 35	– 151	– 148
Leasing and property administration	– 45	– 41	– 167	– 163
Net operating income	469	429	1,956	1,916
Central administrative expenses	– 23	– 20	– 86	– 83
Net interest rates	– 173	– 159	– 674	– 660
Income from property management	273	250	1,196	1,173
Changes in value
Properties	10	97	107	194
Derivatives	206	171	– 394	– 429
Income before tax	489	518	909	938
Current tax	– 2	– 1	– 11	– 10
Deferred tax	– 125	– 123	– 219	– 217
Net income for the period/year	362	394	679	711
Other total net income
Translation of currencies	– 1	–	– 1	0
Unrealized change in value, derivatives	1	–	1	0
Total net income for the period/year	362	394	679	711

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

Data per Share
	2012 Jan - March	2011 Jan - March	Rolling 4 quarters April 11 - March 12	2011 Jan - Dec
Average number of shares, thousand	164,000	164,000	164,000	164,000
Income from property management, SEK	1.66	1.52	7.29	7.15
Income from property management after tax (EPRA EPS*), SEK	1.59	1.47	7.13	7.01
Earnings after tax, SEK	2.21	2.40	4.14	4.34
Outstanding number of shares, thousand	164,000	164,000	164,000	164,000
Property value of properties, SEK	209	197	209	207
Long term net asset value (EPRA NAV*), SEK	95	91	95	97
Actual net asset value (EPRA NNNAV*), SEK	86	84	86	87

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

Financial Key Ratios
	2012 Jan - March	2011 Jan - March	Rolling 4 quarters April 11 - March 12	2011 Jan - Dec
Net operating income margin	62%	60%	66%	66%
Interest coverage ratio	258%	257%	277%	278%
Return on actual net asset value	13.3%	14.3%	6.3%	6.4%
Return on total capital	5.3%	6.3%	5.9%	6.2%
Net investments, SEKm	323	419	1,812	1,908
Loan to value ratio	52%	51%	52%	51%

*EPRA, European Public Real Estate Association, is an association for listed real estate owners and investors in Europe, which sets standards for financial reporting. A part of this involves 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 2012	31 March 2011	31 December 2011
Assets
Investment properties	34,200	32,284	33,867
Other fi xed assets	21	15	15
Current receivables	155	177	192
Cash and bank	22	113	97
Total assets	34,398	32,589	34,171
Shareholders' equity and liabilities
Shareholders' equity	10,958	10,886	11,203
Deferred tax liability	3,839	3,620	3,714
Derivatives	796	403	1,003
Long term interest-bearing liabilities	17,839	16,370	17,160
Non interest-bearing liabilities	966	1,310	1,091
Total shareholders' equity and liabilities	34,398	32,589	34,171
Pledged assets (property mortgages)	18,977	17,353	18,986
Contingent liabilities	–	–	–

Changes in Equity

SEKm	No of outstanding shares, thousand Share capital		Other capital contribution	Translation of currency reserve	Hedging of currency reserve	Retained	earnings Total equity
Shareholders' equity 31-12-2010	164,000	86	4,096	–	–	6,900	11,082
Dividend, March 2011 (SEK 3.60/share)	–	–	–	–	–	– 590	– 590
Net income January-March 2011	–	–	–	–	–	394	394
Other total net income January-March 2011	–	–	–	–	–	–	–
Shareholders' equity 31-03-2011	164,000	86	4,096	–	–	6,704	10,886
Net income April-December 2011	–	–	–	–	–	317	317
Other total net income April-December 2011	–	–	–	0	0	–	0
Shareholders' equity 31-12-2011	164,000	86	4,096	0	0	7,021	11,203
Dividend, March 2012 (SEK 3.70/share)	–	–	–	–	–	– 607	– 607
Net income January-March 2012	–	–	–	–	–	362	362
Total net income January-March 2012	–	–	–	– 1	1	–	0
Shareholders' equity 31-03-2012	164,000	86	4,096	– 1	1	6,776	10,958

Cash Flow Statement

SEKm	2012 Jan - March	2011 Jan - March	Rolling 4 quarters April 11 - March 12	2011 Jan - Dec
Net operating income	469	429	1,956	1,916
Central administrative expenses	– 23	– 20	– 86	– 83
Reversed depreciations	1	1	6	6
Net interest rates paid	– 153	– 116	– 688	– 651
Tax paid	– 3	– 6	– 11	– 14
Cash fl ow from operating activities before change in working capital	291	288	1,177	1,174
Change in current receivables	37	– 9	– 5	– 51
Change in current liabilities	– 108	142	– 66	184
Cash fl ow from operating activities	220	421	1,106	1,307
Investments in new constructions, refurbishments and extensions	– 307	– 244	– 1,221	– 1,158
Property acquisitions	– 24	– 278	– 603	– 857
Change in liabilities at acquisitions of property	– 36	133	– 264	– 95
Property sales	8	98	12	102
Change in receivables at sales of property	–	– 27	30	3
Other net investments	– 8	– 1	– 13	– 6
Cash fl ow from investment activities	– 367	– 319	– 2,059	– 2,011
Change in long term liabilities	679	589	1,469	1,379
Dividend paid	– 607	– 590	– 607	– 590
Cash fl ow from investment activities	72	– 1	862	789
Cash fl ow for the period/year	– 75	101	– 91	85
Cash and bank, opening balance	97	12	113	12
Cash and bank closing balance	22	113	22	97

Opportunities and Risks for Group and Parent Company

Opportunities and risks in the cash flow

Over time, increasing market interest rates normally constitute an effect of economic growth and increasing infl ation, which is thought to result in higher rental income. This is partly due to the fact that the demand for premises is thought to increase. This leads in turn to reduced vacancies and hence to the potential for increasing market rents. It is also partly due to the fact that the index clause in commercial contracts compensates for 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 changes in rental income and interest cost do not take place at the exact same time, which is why the effect on income in the short run 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	+ 30/– 30	+	–
Vacancies	+ 34/– 34	+	–
Property costs	– 11/+ 11	–	0
Interest costs	– 68/+ 63	–	+

Opportunities and risks in property values

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

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

Sensitivity analysis - change in value
Properties	–20%	–10%	0	+10%	+20%
Changes in value, SEKm	– 6,840	– 3,420	0	3,420	6,840
Loan to value ratio	65%	58%	50%	47%	43%

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, as well as the credit market, such as funding and fi nancial risk management.

The parent company takes part in property-related operations through involvement in subsidiary Boards.

Income statement	2012	2011	2011
SEKm	Jan-March	Jan-March	Jan-Dec
Income	4	4	19
Operating expenses	– 16	– 13	– 61
Net fi nancial items	4	1	10
Dividend	–	–	772
Changes in value, interest rate derivatives	206	171	– 429
Income before tax	198	163	311
Tax	– 53	– 43	78
Net income for the period/year	145	120	389
Comprehensive income for the parent company
Net income for the period/year	145	120	389
Other total net income
Translation diff. foreign operations	– 1	–	0
Unrealized change, currency hedge	1	–	0
Total net income for the period/year	145	120	389
Balance sheet SEKm	31 March 2012	31 March 2011	31 Dec 2011
Participations in group companies Receivables, group companies	5,338 17,741	4,087 16,530	5,338 18,204
Other assets	226	135	280
Cash and bank Total	0 23,305	0 20,752	0 23,822
Shareholders' equity	4,395	3,458	4,857
Derivatives	796	403	1,003
Interest bearing liabilities	16,664	15,250	15,909
Interest bearing liabilities, group companies	1,278	1,444	1,899
Other liabilities	172	197	154
Total	23,305	20,752	23,822
Pledged assets (receivables
group companies)	16,097	14,644	16,103
Contingent liabilities (guaranteed commitments for subsidiaries)	1,174	1,062	1,174

Annual General Meeting

At the Annual General Meeting on March 22, 2012 decisions were i. e. made on;

• a dividend of SEK 3.70 per share,
• re-election of members of the Board Per Berggren, Marianne Dicander Alexandersson, Ulla-Britt Fräjdin- Hellqvist, Christer Jacobsson and Johan Skoglund. New election of Charlotte Strömberg and Jan Åke Jonsson as members of the Board. Charlotte Strömberg was elected as new chairman of the Board. Further was decided that remuneration to the Board of Directors should be SEK 1,980,000 in total,
• a renewed mandate for the Board to decide on purchase and transfer of the company's own shares.

Gothenburg 17 April, 2012

Håkan Hellström Chief Executive Offi cer This Interim Report has not been examined by the company's auditors.

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 9,400 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 Pensioenfonds 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 31-03-2012	Number of shares thousand	Percentage of voting rights and capital
AFA Sjukförsäkrings AB	7,113	4.3%
László Szombatfalvy	5,000	3.0%
Magdalena Szombatfalvy	4,935	3.0%
Lannebo Småbolag	2,950	1.8%
AMF Pensionsförsäkrings AB	2,730	1.7%
Andra AP-fonden	2,091	1.3%
Fjärde AP-fonden	1,749	1.1%
Tredje AP-fonden	1,727	1.1%
Länsförsäkringar Fastighetsfond	1,693	1.0%
Swedbank Robur Småbolagsfond Sverige	1,365	0.8%
Board and executive management Castellum	401	0.2%
Other shareholders registered in Sweden	46,423	28.4%
Shareholders registered abroad	85,823	52.3%
Total outstanding shares	164,000	100.0%
Repurchased shares	8,007
Total registered shares	172,007

Distribution of shareholders by country 31-03-2012

The Castellum share price as at 31 March, 2012 was SEK 83.35 (91.80) equivalent to a market capitalization of SEK 13.7 billion (15.1), calculated on the number of outstanding shares.

During the period, a total of 42 million (38) shares were traded, equivalent to an average of 662,000 shares (599,000) per day, corresponding on an annual basis to a turnover rate of 101% (92%). The share turnover is based on statistics from NASDAQ OMX, Chi-X, Burgundy amd Turquoise.

Growth, yield and financial risk

During the last 12-month period the total yield of the Castellum share has been –5% (31%), including dividend of SEK 3.70 (3.60).

	1 year	3 years	10 years
		average/	average/
		year	year
Total yield of the share (incl. dividend)
Castellum	– 5%	27%	15%
NASDAQ OMX Stockholm (SIX Return)	– 3%	24%	7%
Real Estate Index Sweden (EPRA)	– 8%	27%	14%
Real Estate Index Europe (EPRA)	– 3%	23%	5%
Growth
Income from prop. management SEK/share	3%	6%	8%
Net income for the year after tax SEK/share	– 69%	neg.	– 4%
Long term net asset value SEK/share	4%	6%	7%
Actual net asset value SEK/share	2%	7%	6%
Dividend SEK/share	3%	6%	9%
Real estate portfolio SEK/share	6%	6%	8%
Change in property value, unweighted	0%	1%	1%
Yield
Return on actual net asset value	6.3%	12.2%	11.1%
Return on total capital	5.9%	6.5%	7.3%
Financial risk
Interest coverage ratio	277%	292%	287%
Loan to value ratio	52%	51%	48%

There is no potential common stock (eg. convertibles.) Valuation - share price related key figures

Earnings Capacity

Post-tax inome from property management relating to income from property management (EPRA EPS) amounted to SEK 7.13 (6.69) on rolling annual basis. This results in a share price yield of 8.6% (7.3%).

Net income after tax amounted on rolling annual basis to SEK 4.14 per share (13.32), which from the share price gives a yield of 5.0% (14.5%).

Yield earnings per share

Net asset value

The long term net asset value (EPRA NAV) can be calculated to SEK 95 per share (91). The share price at the end of the period was thus 88% (101%) of the long term net asset value.

Share price/net asset value

Dividend Yield

The latest carried out dividend of SEK 3.70 (3.60) corresponds to a yield of 4.4% (3.9%) based on the share price at the end of the period.

The Castellum share's price trend and turnover since IPO May 23, 1997 until March 31, 2012

Calendar

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 2013 21 March, 2013

www.castellum.se

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

For further information please contact CEO Håkan Hellström, tel +46 705 60 74 56, or Finance Director Ulrika Danielsson, tel +46 706 47 12 61 or visit Castellum's website.

Subsidiaries

Aspholmen Fastigheter AB

Olaigatan 2, Box 1824 701 18 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

Tjurhornsgränd 6, 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 2012