Castellum — Interim / Quarterly Report 2013

Apr 17, 2013

Interim Report January-March 2013

Interim Report January-March 2013

Castellum is one of the major listed real estate companies in Sweden. The fair value of the real estate portfolio amounts to SEK 37 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 2013 amounted to SEKm 814 (SEKm 753 corresponding period previous year).
• Income from property management amounted to SEKm 300 (273), corresponding to SEK 1.83 (1.66) per share, an increase of 10%.
• Changes in value on properties amounted to SEKm 32 (10) and on interest rate derivatives to SEKm 166 (206).
• Net income after tax for the period amounted to SEKm 403 (362), corresponding to SEK 2.46 (2.21) per share.
• Net investments amounted to SEKm 333 (323) of which SEKm 407 (307) were new constructions, extensions and reconstructions, SEKm 6 (24) acquisitions and SEKm 80 (8) sales.

	2013 Jan-March	2012 Jan-March	2012	2011	2010	2009	2008	2007	2006	2005	2004
Income from property management, SEK/share	1.83	1.66	7.65	7.15	6.96	6.89	5.93	5.63	5.38	5.00	4.52
Change previous year	+10%	+9%	+7%	+3%	+1%	+16%	+5%	+5%	+8%	+11%	+11%
Net income after tax, SEK/share	2.46	2.21	8.98	4,34	11.98	0.98	– 4.04	9.07	10.21	7.89	5.59
Change previous year	+11%	–8%	+107%		–64% +1,122%	pos.	neg.	–11%	+29%	+41%	+108%
Dividend, SEK/share			3.95	3.70	3.60	3.50	3.15	3.00	2.85	2.62	2.38
Change previous year			+7%	+3%	+3%	+11%	+5%	+5%	+9%	+11%	+12%
Property value, SEKm	36,683	34,200	36,328	33,867	31,768	29,267	29,165	27,717	24,238	21,270	19,449
Net investments, SEKm	333	323	2,545	1,908	1,279	1,129	2,710	2,559	1,823	889	774
Loan to value	54%	52%	53%	51%	50%	52%	50%	45%	45%	45%	45%

Henrik Saxborn, new CEO at Castellum

In connection with the Annual General Meeting on March 21st, I took over as CEO of Castellum after seven years as deputy CEO. I am thus familiar with the company and our markets now that I will continue the work to strengthen Castellum's position over the coming years. Castellum's overall strategy and executive group management

team remain unchanged, except for one development: Ulrika Danielsson expands her role as Finance Director, and shares responsibility with me for investor relations and stock-market contacts.

I not that the income from property management of the fi rst quarter, SEKm 300, implies a steady growth of 10%, which is in line with Castellum's objective. The strong income from property management was positively affected by a lump sum payment as a result of an early termination of a lease, which, however, was offset by higher costs for snow removal and a colder fi rst quarter compared with last year. Income from property management during the previous 12-month period shows a slightly lower growth of 7%.

It is satisfying to note both the positive net leasing in the quarter and that lease related to the project portfolio has developed well - we swiftly fi ll our new constructions with customers. In addition, leasing activity in existing portfolio has been positive in the quarter, resulting in a number of new contracts. In my view, this primarily results from Castellum being able to offer competitive premises and a customer-focused property management.

Continuous investments are a central part of Castellum's strategy to reach its objective of 10% annual growth in income from property management. We will continue to build high-quality offi ces and new, effi cient, logistics premises for both current and future customers in good locations.

Castellum follows a well-functioning strategy, focusing on cash fl ow and acting in a long-term perspective. I look forward to developing these objectives together with my colleagues.

Henrik Saxborn CEO

Market comments

Swedish economy

The Swedish economy has progressed somewhat better than expected from the beginning of the year. According to the latest survey conducted by the National Institute of Economic Research, the state of the market shows that there is an increase in confi dence both among companies and households. This improvement mainly depends on stronger domestic demand, which has a positive impact on the service sector. High income growth for households in recent years, together with low infl ation, contribute to increased domestic demand. Industry, however, remains weighed down by weak external demand.

Signs of stabilization can be detected in the labour market. However, unemployment is expected to remain at high levels in coming years.

Macro Sorce: National Institute of Economic Research
Unemployment	Infl ation	GDP
8.5%	– 0.2%	1.4%
(feb -13)	(feb -13 vs feb -12)	(Q4 -12 vs Q4 -11)

Rental market

Demand for premises continues to be high in Castellum's areas. However, some variation can be detected both geographically and according to rental category. Demand has generally been stronger for logistics and office properties than for retail. Rental levels are expected to remain stable.

Property market

Transaction volumes in the Swedish real estate market amounted to approx. SEK 16 billion in the fi rst quarter of 2013, which is SEK 9 billion lower than for corresponding period prevoius year. Commercial properties accounted for 69% (60%) of the volume and Swedish actors accounted for 88% (70%) of the volume.

Castellum's assessment is that the low turnover is primarily due to the strong closing of 2012. Price scenarios and demand in all markets and segments are considered to be stable.

Interest and credit market

Long-term market interest rates rose at the beginning of the period and then fell after renewed turmoil in the euro zone. Short-term market interest rates have remained relatively stable and the Swedish Riksbank decided to leave the repo rate unchanged at 1% in February. The credit market opened strongly and access to and demand for credit risk was high. However, just as for the interest-rate market, the Swedish credit market has been affected by renewed fi nancial turmoil. By the end of March, this led to a slight increase in the price of credit.

For Castellum, access to credit is considered high - both in the credit market and the capital market.

Business Concept Customers and organization

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 growth in cash fl ow, which along with a low fi nancial risk 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 1,800. All investments shall 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. In operations, there shall be an continuing focus on improved productivity and effi ciency.

Strategy for Funding

Capital structure

Castellum shall have low fi nancial risk, 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. This implies that the growth of dividend will follow the growth of income from property management.

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.

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.

The customers - a reflection of Swedish domestic economy

Castellum has approx. 4,700 commercial contracts, with good risk exposure regarding geography, type of premises, length of contracts and fi elds of industry of the customer. The single largest contract corresponds to approx. 2% 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 supplements for the tenant's share of the property's total heating, cooling and property-tax costs.

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 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 own personnel and in cases where external services are purchased, high demands are placed on suppliers in terms of quality, customer contact, service, ethics and environmental awareness.

Subsidiaries with strong brands

Castellum has six wholly owned subsidiaries which each engage about 40 employees. The subsidiary organizations are not identical but are in principle made up of a Managing Director, 2-4 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 3-8 facility managers. Everyone has customer contact. The fl at organization provides a short decision-making process and creates a customer oriented and active organization.

Castellum subsidiaries operate under their own names, which are strong brands on each local market.

Engagement in the local markets

Castellum's subsidiaries are involved in the local business community through business associations where important contacts are taken with both current and prospective customers. Castellum, as one of the largest real estate owners on local markets, also contributes to the regional development where local sub-sidiaries operate through co-operation with municipalities and universities/colleges.

Employees

Castellum works actively to hire and retain top-notch employees by offering a stimulating work environment, competence development and sharing of experiences both internally and externally.

Employee viewpoints on Castellum are monitored regularly and the survey carried out in 2011 continues to show a very high index, 87 on a scale of 100 which shows that the employees enjoy their working situation and have a high confi dence in the company and its management.

The group has 265 employees.

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). Further Castellum also handles rules for decision making and work allocation, overall policies, IT/IS strategies, personnel and legal matters. Castellum AB has 18 employees.

The parent company takes active part in operations through involvement in subsidiary Boards.

Responsible business

Since 1995, Castellum has systematically been 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.

Environmental efforts are focused on effi cient energy consumption and improving the general environmental status of each property. Since the common Group objectives were set in 2007 (energy consumption to be reduced by at least 1% per sq.m. and year; carbon dioxide emissions reduced by at least 2.5% per sq.m.), decreases of 17% and 26% respectively have been achieved.

All new constructions must be environmentally classifi ed according to one of the following environmental classifi cation systems: Green Building, "Miljöbyggnad", BREEAM or LEED. Castellum owns 95 of Sweden's 286 Green Building classifi ed building, one BREEAM certifi ed building and one building which are certifi ed according to the Swedish system "Miljöbyggnad".

Castellum's 4 corner stones

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 2013 to SEKm 300 (273), equivalent to SEK 1.83 (1.66) per share - an increase of 10%. Income from property management rolling four quarters amounted to SEKm 1,282 (1,196) equivalent to SEK 7.82 per share (7.29) - an increase of 7%.

Income from property management per share

During the period, changes in value on properties amounted to SEKm 32 (10) and on interest rate derivatives to SEKm 166 (206). Net income after tax for the period was SEKm 403 (362), equivalent to SEK 2.46 (2.21) per share.

Rental income

Group rental income amounted to SEKm 814 (753). For offi ce and retail properties, the average contracted rental level, including charged heating, cooling and property tax, amounted to SEK 1,268 per sq.m., whereas for warehouse and industrial properties, it amounted to SEK 752 per sq.m. Rental levels, which are considered to be in line with the market, have increased by 1% in comparable portfolio compared with previous year, which is mainly an effect of index clause adjustments.

The average economic occupancy rate was 89.3% (88.5%). The total rental value for vacant premises on yearly basis amounted to approx. SEKm 436 (424).

The rental income for the period includes a lump sum of SEKm 11 as a result of early termination of a lease.

Gross leasing (i.e. the annual value of total leasing) during the period was SEKm 84 (73), of which SEKm 4 (10) were leasing of new constructions, extensions and reconstructions. Notices of termination amounted to SEKm 57 (81), of which bankruptcies were SEKm 4 (6) and SEKm 1 (14) were notices of termination with more than 18 months remaining length of contract. Hence net leasing for the period was SEKm 27 (–8). The time difference between reported net leasing and the effect in income thereof is estimated to be between 9-18 months.

Property costs

Property costs amounted to SEKm 317 (284) corresponding to SEK 352 per sq.m. (335). The increase of 5% is primarily due to both higher costs for snow as well as heating due to a colder fi rst quarter compared to last year. Costs for heating during the period has been calculated to 109% (94%) of a normal year according to the degree day statistics.

The general property taxation is expected to be notifi ed during summer 2013. With the assumption of a 10% increase in the taxable value, Castellum's net operating income is estimated to be affected by SEKm –4 on an annually basis due to vacant premises.

Property costs, SEK/sq.m.
	Offi ce/	Warehouse/	Total	Total
	Retail	Industrial	2013	2012
Operating expenses	254	171	214	198
Maintenance	41	22	32	32
Ground rent	8	6	7	7
Property tax	66	18	44	45
Direct property costs	369	217	297	282
Leasing and property administration (indirect)	–	–	55	53
Total	369	217	352	335
Previous year	351	198	335

Central administrative expenses

Central administrative expenses totalled SEKm 21 (23). This includes costs for a profi t-and-share-price related incentive plan for 10 persons in executive management of SEKm 1 (3).

Net interest rate

Net interest items were SEKm –176 (–173). The average interest rate level was 3.8% (4.1%).

Interest rate levels

Changes in value

The change in value in Castellum's portfolio during the period amounted to SEKm 32 (10). Since the prices have been generally stable no general yield change has been made in the internal valuations during the period. The change in value includes SEKm 8 from two sold properties. The net sales price amounted to SEKm 80 after reduction for assessed deferred tax and transaction costs of SEKm 5. Hence the underlying property price, which amounted to SEKm 85, exceeded the latest valuation of SEKm 72 with SEKm 13.

The value in the derivatives portfolio has changed by SEKm 166 (206), mainly due to changes in long-term market interest rates. Castellum's currency derivatives, with purpose to hedge currency fl uctuations in the Danish investment, has during the period changed SEKm 7 (1) where the value changes is accounted for in the other total net income.

Tax

The nominal corporate tax rate in Sweden is 22%. Due to the possibility to deduct depreciation and reconstructions for tax purposes, and to utilize tax loss carry forwards, the paid tax is low. Paid tax occurs since a few subsidiaries has no possibilities to group contributions for tax purpose.

Remaining tax loss carryforwards can be calculated to SEKm 1,415 (1,610). Fair values for the properties exceed their fi scal value by SEKm 17,642 (17,412) of which SEKm 758 relates to properties acquired and accounted for as asset acquisitions. As deferred tax liability, a full nominal 22% tax of the net difference is reported, reduced by the deferred tax relating to asset acquisitions, i.e., SEKm 3,403 (3,310).

Castellum has entered into an agreement on extended co-operation with the Swedish Tax Authority. Castellum has no current tax disputes.

Tax Calculation 31-03-2013

	Basis	Basis
SEKm	current tax	deferred tax
Income from property management	300
Deductions for tax purposes
depreciations	– 160	160
reconstructions	– 95	95
Other tax allowances	– 5	– 5
Taxable income from property management	40	250
Properties sold	0	– 45
Changes in value on properties	0	24
Changes in value on interest rate derivatives	166	0
Taxable income before tax loss carry forwards	206	229
Tax loss carry forwards, opening balance	– 1,610	1,610
Tax loss carry forwards, closing balance	1,415	– 1,415
Taxable income	11	424
Of which 22% current/deferred tax	– 2	– 93

Real Estate Portfolio

The real estate portfolio is located in Greater Gothenburg, the Öresund Region, Greater Stockholm, Mälardalen and Eastern Götaland. The three major urban regions represents 73% of the portfolio.

The commercial portfolio consists of 64% offi ce and retail properties and 31% warehouse and industrial properties. The properties are located from inner city sites (except in Greater Stockholm from inner suburbs) to well-situated working-areas with adequate means of communication and services. The remaining 5% consist of projects and undeveloped land.

Castellum owns approx. 770,000 sq.m. of unutilized building rights and ongoing projects with an remaining investment level of approx. SEKm 1,300.

Investments

During the period the real estate portfolio has changed as below.

Changes in the real estate portfolio Value, SEKm		Number
Real estate portfolio on 1 January, 2013	36,328	635
+ Acquisitions	6	1
+ New constructions, extensions and reconstructions	407	–
– Sales	– 72	– 2
+/– Unrealized changes in value	24	–
+/– Currency translation	– 10	–
Real estate portfolio on 31 March, 2013	36,683	634

During the period, investments totalling SEKm 413 (331) were carried out, of which SEKm 407 (307) were new constructions, extensions and reconstructions and SEKm 6 (24) were acquisitions. Of the total investments SEKm 106 refers to Greater Stockholm, SEKm 81 to the Öresund Region, SEKm 80 to Eastern Götaland, SEKm 78 to Mälardalen and SEKm 68 to the Greater Gothenburg.

After reduction for sold properties of SEKm 80 (8) the net investments totalled SEKm 333 (323).

Net property investments

Property value

Internal valuations

Castellum assesses the value of the properties through internal valuations, corresponding to level 3 in IFRS 13. 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. Properties with building rights have been valued on the basis of an estimated market value per square metre, on average approx. SEK 990 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 valuations has historically been small.

Based on these internal valuations, property value at the end of the period were assessed to SEKm 36,683 (36,328), corresponding to SEK 10,006 per sq.m.

Average valuation yield

(excl. project/land and building rights)	SEKm
Net operating income properties	543
+ Real occupancy rate, 94% at the lowest	62
+/- Property cost annual rate	51
– Property administration, 30 SEK/sq.m.	– 26
Normalized net operating income (3 months)	630
Valuation (excl. building rights of SEKm 445)	34,733
Average valuation yield	7,3%

Larger investments and sales

Larger projects Property	Area sq.m	Econ. occup. April 2013	Total inv., land Remain. inv. incl. SEKm	SEKm	Completed Comment
Ongoing projects
Lindholmen 28:3, Gothenburg	9,400	24%	280	104	Q2 2013	New construction offi ce
Dragarbrunn 20:4, Uppsala	10,020	38%	190	131	Q3 2014	Extension and reconstruction offi ce
Atollen, Jönköping	6,019	18%	169	61	Q4 2013	New construction offi ce/retail/residentials
Sändaren 1, Malmö	14,000	89%	110	84	Q4 2013	Extension and reconstruction offi ce
Visiret 2, Huddinge	12,357	100%	71	29	Q2 2013	New construction car park
Åby 1:223, Haninge	6,550	0%	67	22	Q1 2014	New construction warehouse/logistic
Högspänningen 1, Västerås	4,040	25%	47	43	Q1 2014	New construction logistic/offi ce
Rosersberg 11:34, Sigtuna	3,900	89%	40	1	Q2 2013	New construction warehouse/offi ce
Boländerna 35:1, Uppsala	8,750	65%	38	31	Q3 2013	Reconstruction retail
Grusbacken 3, Helsingborg	2,450	100%	35	12	Q3 2013	New construction offi ce/warehouse
Projects completed/partly moved in
Fullriggaren 4, Malmö	5,400	17%	157	36	Q1 2013	New construction offi ce*
Forskaren 2, Lund	9,000	74%	142	39	Q4 2012	New construction offi ce*
Gården 15, Linköping	9,705	62%	106	3	Q1 2013	New construction offi ce/retail/warehouse
Inköparen 1, Örebro	4,300	100%	68	1	Q2 2013	New construction offi ce
Ättehögen 18, Jönköping	3,220	100%	39	1	Q1 2013	New construction production premises

Larger sales during 2013		Underlying prop.	Deferred tax,	Net sales
Property	Area sq.m		price, SEKm trans costs, SEKm	price, SEKm	Access	Category
Alphyddan 11, Stockholm	4,363	53	– 4	49	Feb 2013	Offi ce
Högsbo 4:1, Gothenburg	4,564	32	– 1	31	Feb 2013	Warehouse/offi ce

* Remaining volume of investment will be utilized as the vacant premises are rented out.

Castellum's real estate portfolio 31-03-2013

			31-03-2013			January-March 2013
	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	432	6,192	14,350	140	1,298	94.1%	132	40	366	92
Öresund Region	64	385	5,741	14,904	139	1,439	82.6%	114	38	397	76
Greater Stockholm	51	336	4,350	12,952	117	1,392	80.5%	94	32	381	62
Mälardalen	75	379	4,180	11,027	108	1,141	91.4%	99	34	364	65
Eastern Götaland	55	328	3,195	9,727	86	1,050	88.5%	76	27	333	49
Total offi ce/retail	323	1,860	23,658	12,719	590	1,268	87.4%	515	171	369	344
Warehouse/industrial
Greater Gothenburg	101	668	5,142	7,697	125	747	101.7%	127	33	200	94
Öresund Region	43	316	1,905	6,034	57	735	88.1%	51	18	235	33
Greater Stockholm	50	266	2,427	9,117	65	975	86.0%	56	19	279	37
Mälardalen	39	216	1,235	5,723	38	704	88.2%	33	13	237	20
Eastern Götaland	34	190	811	4,270	26	537	85.0%	22	7	139	15
Total warehouse/industrial	267	1,656	11,520	6,958	311	752	92.9%	289	90	217	199
Total	590	3,516	35,178	10,006	901	1,025	89.3%	804	261	297	543
Leasing and property administration									49	55	– 49
Total after leasing and property administration									310	352	494
Development projects	16	100	1,224	–	22	–	–	10	6	–	4
Undeveloped land	28	–	281	–	–	–	–	–	–	–	–
Total	634	3,616	36,683	–	923	–	–	814	316	–	498

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 498 accounted for above and the net operating income of SEKm 497 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 value by property type Property value by region

Property related key ratios Segment information

	2013 Jan-March	2012 Jan-March	2012 Jan-Dec
Rental value, SEK/sq.m.	1,025	1,011	1,015
Economic occupancy rate	89.3%	88.5%	88.6%
Property costs, SEK/sq.m.	352	335	298
Net operating income, SEK/sq.m.	562	560	601
Property value, SEK/sq.m.	10,006	9,903	9,916
Number of properties	634	616	635
Lettable area, thousand sq.m.	3,616	3,413	3,621

		Rental income	Income from property management
	2013	2012	2013	2012
SEKm	Jan-March	Jan-March	Jan-March	Jan-March
Greater Gothenburg	260	243	116	100
Öresund Region	166	149	58	58
Greater Stockholm	154	139	54	50
Mälardalen	137	129	46	42
Eastern Götaland	97	93	34	31
Total	814	753	308	281

The discrepancy between the income from property management of SEKm 308 (281) above and the groups accounted income before tax of SEKm 498 (489) consists of unallocated income from property management of SEKm –8 (–8), changes in property value of SEKm 32 (10) and changes in values of interest rate derivatives of SEKm 166 (206).

Financing

Castellum's assets had a value of SEKm 36,984 (36,631) on 31 March 2013 and these are fi nanced as follows.

Financing 31-03-2013

Castellum shall have a low financial risk, meaning a loan to value ratio not permanently exceeding 55% and an interest coverage ratio of at least 200%

Loan to value ratio and interest coverage ratio

Interest bearing liabilities

At the end of the period Castellum had binding credit agreements totalling SEKm 24,089 (23,361) of which SEKm 21,257 (20,262) were long term binding and SEKm 2,832 (3,099) were short term binding.

During the period SEKm 1,000 were issued under the MTN-program.

After deduction of liquid assets of SEKm 18 (44), net interest bearing liabilities were SEKm 19,755 (19,050), of which SEKm 2,200 (1,200) were MTN and SEKm 1,605 (1,872) outstanding commercial papers.

Most of Castellum's loans are short-term revolving loans, utilized in long-term binding credit agreements in the largest nordic banks. This means great fl exibility in the choice of interest rate base, interest rate period and tied up capital. The MTN-program and the commercial papers are a complement to the existing funding in banks and will broaden the funding base.

Long-term loan commitments in banks are secured by pledged mortgages and/or fi nancial covenants. Outstanding commercial papers and the MTN-program are unsecured.

The interest bearing liabilities amounted to SEKm 19,755 (19,050) of which SEKm 15,964 (15,917) were secured by the company's properties and SEKm 3,791 (3,133) unsecured. The proportion of used secured fi nancing was thus 44% of the property value. 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, 54% and 270% respectively. The average duration of Castellum's long-term credit agreements was 3.9 years (4.1). Margins and fees on long-term credit agreements had an average duration of 2.6 years (2.8).

	Loan maturity structure 31-03-2013
			Utilized in:
	Credit
SEKm	agreements	Bank	MTN /Cert	Total
0 - 1 year	2,832	991	1,605	2,596
1 - 2 years	2,406	1,356	–	1,356
2 - 3 years	6,007	2,659	1,200	3,859
3 - 4 years	5,007	3,907	1,000	4,907
4 - 5 years	5,707	4,907	–	4,907
> 5 years	2,130	2,130	–	2,130
Total	24,089	15,950	3,805	19,755
	Unutilized credit in long term credit agreements			1,502

Interest rate maturity structure

The average effective interest rate as of 31 March, 2013 was 3.8% (3.6%). The market interest rate for an equal portfolio, regarding both current market rate and credit margin, can be assessed to 4.4% (4.2%). In order to secure a stable and low net cash fl ow of interest income/costs the interest rate maturity structure is distributed over time. The average fi xed interest term on the same date was 2.7 years (2.8).

Castellum utilizes interest rate derivatives to achieve the desired interest rate maturity structure. 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 31-03-2013
Interest rate
	Loan	derivatives		Closing
	SEKm	SEKm	Net, SEKm	interest rate
0 - 1 year	19,630	– 8,650	10,980	3.7%
1 - 2 years	–	300	300	3.1%
2 - 3 years	125	550	675	4.9%
3 - 4 years	–	1,500	1,500	4.5%
4 - 5 years	–	1,500	1,500	3.4%
5 - 10 years	–	4,800	4,800	3.7%
Total	19,755	–	19,755	3.8%

Interest rate maturity structure

Currency

Castellum has made investments of SEKm 436 (435) 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 the fi nancial policy, between 60-100% of investments in foreign subsidiaries are to be fi nanced in local currency.

Interest rate and currency derivatives

According to the accounting standard IAS 39, derivatives are subject to market valuation. 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. Castellum also has derivatives in order to hedge currency fl uctuation in its 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. At maturity, a derivative's market value is dissolved in its entirety and the change in value over time has thus not affected equity.

To calculate the market value of derivatives, market rates for each term and, where appropriate, exchange rates, as quoted on the market at the closing date are used. Interest rate swaps are valued by discounting future cash fl ows to present value while instruments containing options are valued at current repurchase price, which is obtained from the counter-party.

As of March 31, 2013, the market value of the interest rate derivatives portfolio amounted to SEKm –950 (–1,116) and the currency derivat portfolio to SEKm 18 (11). All derivatives are classifi ed in level 2 according to IFRS 13.

	Policy	Committment	Outcome
Loan to value ratio	Not in the long run exceeding 55%	No more than 65%	54%
Interest coverage ratio	At least 200%	At least 150%	270%
Interest rate risk
– average fi xed interest term	0.5-3 years	–	2.7 years
– proportion maturing within 6 months	No more than 50%	–	44%
Currency risk
– investment	60%-100% funded in local currency	–	79%
– other currency risks	Not allowed	–	No exposure
Funding risk	At least 50% of interest bearing liabilities have a duration of at least 2 years	–	100%
Counterparty risk	Credit institutions with high ratings, at least "investment grade"	–	Satisfi ed
Liquidity risk	Liquidity reserve in order to fulfi ll payments due	–	SEKm 1,502 unutilized credit agreements

Castellum's fi nancial policy and committments in credit agreements

Consolidated statement of Comprehensive Income
	2013	2012	Rolling 4 quarters	2012
SEKm	Jan - March	Jan - March	April 12 - March 13	Jan - Dec
Rental income	814	753	3,134	3,073
Operating expenses	– 193	– 168	– 569	– 544
Maintenance	– 28	– 27	– 131	– 130
Ground rent	– 7	– 6	– 25	– 24
Property tax	– 40	– 38	– 154	– 152
Leasing and property administration	– 49	– 45	– 196	– 192
Net operating income	497	469	2,059	2,031
Central administrative expenses	– 21	– 23	– 91	– 93
Net interest costs	– 176	– 173	– 686	– 683
Income from property management	300	273	1,282	1,255
Changes in value
Properties	32	10	– 47	– 69
Derivatives	166	206	– 150	– 110
Income before tax	498	489	1,085	1,076
Current tax	– 2	– 2	– 7	– 7
Deferred tax	– 93	– 125	436	404
Net income for the period/year	403	362	1,514	1,473
Other total net income - Items that will be reclassifi ed into profi t/loss
Translation difference of currencies	– 7	– 1	– 18	– 12
Change in value derivatives, currency risk hedge	7	1	14	8
Total net income for the period/year	403	362	1,510	1,469

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

Data per Share
	2013	2012	Rolling 4 quarters	2012
	Jan - March	Jan - March	April 12 - March 13	Jan - Dec
Average number of shares, thousand	164,000	164,000	164,000	164,000
Income from property management, SEK	1.83	1.66	7.82	7.65
Income from property management after tax (EPRA EPS*), SEK	1.77	1.59	7.45	7.27
Earnings after tax, SEK	2.46	2.21	9.23	8.98
Outstanding number of shares, thousand	164,000	164,000	164,000	164,000
Property value, SEK	224	209	224	222
Long term net asset value (EPRA NAV*), SEK	99	95	99	100
Actual net asset value (EPRA NNNAV*), SEK	88	86	88	90

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

Financial Key Ratios
	2013	2012	Rolling 4 quarters	2012
	Jan - March	Jan - March	April 12 - March 13	Jan - Dec
Net operating income margin	61%	62%	66%	66%
Interest coverage ratio	270%	258%	287%	284%
Return on actual net asset value	12.3%	13.3%	7.9%	7.9%
Return on total capital	5.5%	5.3%	5.4%	5.3%
Net investments, SEKm	333	323	2,555	2,545
Loan to value ratio	54%	52%	54%	53%

*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 2013	31 March 2012	31 December 2012
Assets
Investment properties	36,683	34,200	36,328
Other fi xed assets	26	21	27
Current receivables	257	155	232
Cash and bank	18	22	44
Total assets	36,984	34,398	36,631
Shareholders' equity and liabilities
Shareholders' equity	11,820	10,958	12,065
Deferred tax liability	3,403	3,839	3,310
Derivatives	932	796	1,105
Long term interest-bearing liabilities	19,773	17,839	19,094
Non interest-bearing liabilities	1,056	966	1,057
Total shareholders' equity and liabilities	36,984	34,398	36,631
Pledged assets (property mortgages)	18,642	18,977	18,764
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 31-12-2011	164,000	86	4,096	0	0	7,021	11,203
Dividend, March 2012 (SEK 3.70/share)	–	–	–	–	–	– 607	– 607
Net income Jan-March 2012	–	–	–	–	–	362	362
Other total net income Jan-March 2012	–	–	–	– 1	1	–	0
Shareholders' equity 31-03-2012	164,000	86	4,096	– 1	1	6,776	10,958
Net income April-Dec 2012	–	–	–	–	–	1,111	1,111
Other total net income April-Dec 2012	–	–	–	– 11	7	–	– 4
Shareholders' equity 31-12-2012	164,000	86	4,096	– 12	8	7,887	12,065
Dividend, March 2013 (SEK 3.95/share)	–	–	–	–	–	– 648	– 648
Net income Jan-March 2013	–	–	–	–	–	403	403
Total net income Jan-March 2013	–	–	–	– 7	7	–	0
Shareholders' equity 31-03-2013	164,000	86	4,096	– 19	15	7,642	11,820

Cash Flow Statement

	2013	2012	Rolling 4 quarters	2012
SEKm	Jan - March	Jan - March	April 12 - March 13	Jan - Dec
Net operating income	497	469	2,059	2,031
Central administrative expenses	– 21	– 23	– 91	– 93
Reversed depreciations	2	1	10	9
Net interest rates paid	– 141	– 153	– 688	– 700
Tax paid	– 9	– 3	– 7	– 1
Translation difference foreign operations	0	–	3	3
Cash fl ow from operating activities before change in
working capital	328	291	1,286	1,249
Change in current receivables	– 22	37	– 91	– 32
Change in current liabilities	– 29	– 108	112	33
Cash fl ow from operating activities	277	220	1,307	1,250
Investments in new constructions, refurbishments and extensions	– 407	– 307	– 1,379	– 1,279
Property acquisitions	– 6	– 24	– 1,501	– 1,519
Change in liabilities at acquisitions of property	–	– 36	– 20	– 56
Property sales	80	8	325	253
Change in receivables at sales of property	0	–	– 8	– 8
Other net investments	– 4	– 8	– 14	– 18
Cash fl ow from investment activities	– 337	– 367	– 2,597	– 2,627
Change in long term liabilities	679	679	1,934	1,934
Change in long term receivables	3	–	0	– 3
Dividend paid	– 648	– 607	– 648	– 607
Cash fl ow from fi nancing activities	34	72	1,286	1,324
Cash fl ow for the period/year	– 26	– 75	– 4	– 53
Cash and bank, opening balance	44	97	22	97
Cash and bank closing balance	18	22	18	44

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 SEKm	2013 Jan-March	2012 Jan-March	2012 Jan-Dec
Income	4	4	15
Operating expenses	– 15	– 16	– 68
Net fi nancial items	3	4	15
Dividend/Group contributions	–	–	645
Changes in value, interest
rate derivatives	166	206	– 110
Income before tax	158	198	497
Tax	– 35	– 53	– 49
Net income for the period	123	145	448
Comprehensive income for the parent company
Net income for the period	123	145	448
Other total net income - Reclassifi ed into profi t/loss
Translation diff. foreign operations	– 7	– 1	– 10
Unrealized change, currency hedge	7	1	8
Total net income for the period	123	145	446
Balance sheet SEKm	31 March 2013	31 March 2012	31 Dec 2012
Participations in group companies	5,838	5,338	5,338
Receivables, group companies	17,732	17,741	18,628
Other assets	203	226	234
Cash and bank	0	0	27
Total
	23,773	23,305	24,227
Shareholders' equity	4,171	4,395	4,696
Derivatives	932	796	1,105
Interest bearing liabilities	17,606	16,664	16,924
Interest bearing liabilities,
group companies	892	1,278	1,361
Other liabilities	172	172	141
Total	23,773	23,305	24,227
Pledged assets (receivables group companies) Contingent liabilities (guaranteed	14,973	16,097	15,090

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 and the Annual Accounts Act. Since the beginning of the year, Castellum applies the new layout of other net income in accordance with IAS 1 and discloses enhanced information about items measured at fair value in accordance with IFRS 13. Accounting principles and methods for calculations have remained unchanged compared with the Annual

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			Scenario
	+/– 1% (units)	Boom	Recession
Rental level / Index	+ 33/– 33	+	–
Vacancies	+ 37/– 37	+	–
Property costs	– 13/+ 13	–	0
Interest costs	– 78/+ 72	–	+

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. 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	– 7,337	– 3,668	0	3,668	7,337
Loan to value ratio	67%	60%	54%	49%	45%

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

Annual General Meeting

At the Annual General Meeting on March 21, 2013 decisions were i. e. made on;

• a dividend of SEK 3.95 per share,
• re-election of members of the Board Charlotte Strömberg, Per Berggren, Marianne Dicander Alexandersson, Ulla-Britt Fräjdin-Hellqvist, Christer Jacobsson, Jan Åke Jonsson and Johan Skoglund. Charlotte Strömberg was re-elected as chairman of the Board. Further was decided that remuneration to the Board of Directors should be SEK 2,115,000 in total,
• to appoint a new election committee for the AGM 2014 by the the chairman of the board who is assigned to contact the three largest ownership registered or other wise known shareholders as per the last share trading day in August 2013 and to invite them to each appoint one member of the election committee. The names of the members of the election committee shall be made public no later than six months before the AGM 2014,
• guidelines for remuneration to members of the executive management and renewed incentive program to the executive management, and
• a renewed mandate for the Board to decide on purchase and transfer of the company's own shares.

Gothenburg April 17, 2013

Henrik Saxborn 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 9,800 shareholders. Shareholders registered abroad cannot be broken down in terms of directly held and nominee registered shares except for two foreign shareholder who has fl agged for holding over 5%, Stichting Pensioenfonds ABP and European Investors Holding Company Inc. 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 31-03-2013	Number of shares thousand	Percentage of voting rights and capital
Magdalena Szombatfalvy	4,935	3.0%
SEB	4,446	2.7%
AFA Sjukförsäkrings AB	2,615	1.6%
Stiftelsen Global Challenges Foundation	2,500	1.5%
László Szombatfalvy	2,500	1.5%
Lannebo Småbolag	2,100	1.3%
Fjärde AP-fonden	1,965	1.2%
Länsförsäkringar Fastighetsfond	1,902	1.2%
Caceis Bank France	1,854	1.1%
Andra AP-fonden	1,808	1.1%
Board and executive management Castellum	297	0.2%
Other shareholders registered in Sweden	41,232	25.0%
Shareholders registered abroad	95,846	58.4%
Total outstanding shares	164,000	100.0%
Repurchased shares	8,007
Total registered shares	172,007

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

Distribution of shareholders by country 31-03-2013

The Castellum share price as at 31 March, 2013 was SEK 92.80 (83.35) equivalent to a market capitalization of SEK 15.2 billion (13.7), calculated on the number of outstanding shares.

During the period, a total of 29 million (42) shares were traded, equivalent to an average of 461,000 shares (662,000) per day, corresponding on an annual basis to a turnover rate of 70% (101%). The share turnover is based on statistics from NASDAQ OMX, Chi-X, Burgundy, Turquoise and BATS Europe.

Net asset value

When assets and liabilities are valued at fair value the net asset value can be calculated using shareholders' equity in the balance sheet.

The long term net asset value (EPRA NAV) can be calculated to SEK 99 per share (95). The share price at the end of the period was thus 94% (88%) of the long term net asset value.

Net asset value 31-03-2013		SEKm SEK/share
Equity according to the balance sheet	11,820	72
Reversed
Derivatives according to balance sheet	932	6
Deferred tax according to balance sheet	3,403	21
Long term net asset value (EPRA NAV)	16,155	99
Deduction
Derivatives as above	– 932	– 6
Estimated real liability, deferred tax 4.6%*	– 739	– 5
Actual net asset value (EPRA NNNAV)	14,484	88

* Estimated real deferred tax liability net has been calculated to 4.6% based on a discount rate of 3%. Further, assessments have been made that tax loss carry forwards are realized in 5 years with a nominal tax of 22%, giving a present value of deferred tax liability of 20.2%, and that the properties are realized in 50 years where 33% are sold directly with a nominal tax of 22% and that 67% are sold indirect through company disposals where the buyers tax discount is 6%, which gives a present value of deferred tax liability of 5.8%.

Growth, yield and financial risk

During the last 12-month period the total yield of the Castellum share has been 17% (–5%), including dividend of SEK 3.95 (3.70).

	1 year	3 years	10 years
		average/	average/
		year	year
Growth
Rental income SEK/share	6%	5%	6%
Income from prop. management SEK/share	7%	5%	7%
Net income for the year after tax SEK/share	123%	44%	10%
Dividend SEK/share	7%	3%	6%
Long term net asset value SEK/share	4%	7%	7%
Actual net asset value SEK/share	2%	7%	6%
Real estate portfolio SEK/share	7%	8%	8%
Change in property value	– 0.1%	1.5%	1.3%
Yield
Return on long term net asset value	7.9%	11.6%	11.1%
Return on actual net asset value	7.9%	12.3%	10.8%
Return on total capital	5.4%	7.1%	7.1%
Total yield of the share (incl. dividend)
Castellum	17%	13%	17%
NASDAQ OMX Stockholm (SIX Return)	15%	9%	15%
Real Estate Index Sweden (EPRA)	20%	13%	18%
Real Estate Index Europe (EPRA)	17%	10%	9%
Financial risk
Interest coverage ratio	287%	287%	291%
Loan to value ratio	54%	51%	48%
Unutilized long term credit	1,502	1,674	1,539

Valuation

Dividend Yield

The latest carried out dividend of SEK 3.95 (3.70) corresponds to a yield of 4.3% (4.4%) based on the share price at the end of the period.

The share's dividend yield

Earnings

Post-tax inome from property management relating to income from property management (EPRA EPS) amounted to SEK 7.45 (7.13) on rolling annual basis. This results in a share price yield of 8.0% (8.6%).

Net income after tax amounted on rolling annual basis to SEK 9.23 per share (4.14), which from the share price gives a yield of 9.9% (5.0%).

Share price/net asset value

The Castellum share's price trend and turnover since IPO may 23, 1997 until March 31, 2013

Calendar

Half-year Report January-June 2013 16 July, 2013, around 2 pm Interim Report January-September 2013 16 October, 2013 Year-end Report 2013 22 January, 2014 Annual General Meeting 2014 20 March, 2014

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 Henrik Saxborn, tel +46 31 60 74 50, or Finance Director Ulrika Danielsson, tel +46 706 47 12 61 or visit Castellum's website.

Subsidiaries

Aspholmen Fastigheter AB

Rörvägen 1, 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

Jönköpingsvägen 41 A, Box 148, 331 21 Värnamo Telephone +46 370-69 49 00 Telefax +46 370-475 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

Riggaregatan 57, Box 3158, 211 13 Malmö Telephone +46 40-38 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 2013