Castellum — Interim / Quarterly Report 2018

Oct 17, 2018

QUARTERLY REPORT JANUARY – SEPTEMBER 2018

A record strong quarter – 13% growth in income from property management

• Income for the period January-September 2018 amounted to MSEK 4,141 (MSEK 3,866 previous year).
• Income from property management amounted to MSEK 2,219 (1,956), corresponding to SEK 8.12 (7.16) per share, an increase of 13%.
• Changes in value on properties amounted to MSEK 3,150 (2,069) and on derivatives to MSEK 202 (204).
• Net income after tax for the period amounted to MSEK 5,051 (3,424), corresponding to SEK 18.49 (12.53) per share.
• Long term net asset value (EPRA NAV) amounted to SEK 168 (142) per share, an increase of 18%.
• Net investments amounted to MSEK 3,009 (4,560) of which MSEK 1,333 (3,452) pertained acquisitions, MSEK 2,123 (1,980) new developments, extensions and redevelopment. and MSEK 447 (872) to sales. Property value amounted to SEK 87.5 billion by the end of the period.
• Net leasing for the period was MSEK 157 (251).

Important events during the quarter

In the period, Castellum announced the investment of SEK 1.2 billion in new premises for the Swedish National Courts Administration in Malmö. The investment comprises a key element of Castellum's strategy for further growth in the Öresund region and will be one of Castellum's developments in its history.

In September, Castellum drew international attention for its sustainability efforts. Castellum is maintaining its position as the only Nordic company in the property and construction sector on the Dow Jones Sustainability Index. For the third year in a row, Castellum was also named a global sector leader in the Global Real Estate Sustainability Benchmark (GRESB) and received the EPRA Gold Award for the highest rating among the best sustainability reports in Europe. Castellum is also the first property company in the Nordic region to have its climate targets approved by the Science Based Targets (SBT) initiative.

The second dividend of SEK 2.65 per share was paid during the quarter.

Castellum has let 20,400 sq. m. in Gothenburg's Hisingen Logistics Park to the Jollyroom e-commerce company.

In July, Castellum announced its plans to develop a co-working concept, to be launched sometime next year. The base of the offering is Castellum's extensive property portfolio in several Nordic cities. Customers will be offered membership in a digital platform that has office premises and services linked to it.

KEY METRICS	2018 July-Sept	2017 July-Sept	2018 Jan-Sept	2017 Jan-Sept
Income, MSEK	1,401	1,303	4,141	3,866
Net operating income, MSEK	1,025	954	2,965	2,731
Income from property management, MSEK	799	708	2,219	1,956
D:o SEK/share)	2.92	2.59	8.12	7.16
D:o growth	+13%	+5%	+13%	+6%
Net income after tax, MSEK	2,626	777	5,051	3,424
Net investments, MSEK	940	711	3,009	4,560
Net leasing, MSEK	29	52	157	251
Loan to value ratio	46%	49%	46%	49%
Interest coverage ratio	506%	429%	451%	396%
EPRA NAV SEK/share	168	142	168	142
EPRA NNNAV SEK/share	153	127	153	127

This is a translation of the Swedish language original. In the event of any differences between this translation and the Swedish original, the latter shall prevail.

Cover and back: Sketch of new Swedish National Courts Administration in Malmö. Read more on page 14.

A strong market — and record earnings!

The market for commercial properties — primarily office and logistics — is now incredibly strong in the Nordic areas of growth. In combination with the quality shift in Castellum's portfolio we have been developing over the past few years, the strong real estate market has manifested itself during the period, as follows:

- Net leasings remain high. A net total of MSEK 157 (251) was signed, of which half is in our existing portfolio. To this must be added the agreed rental agreements for the Swedish National Courts Administration and the new E.ON head quarter in Malmö, totaling approx. MSEK 146 on an annual basis. - Increasing rent levels. In prime Stockholm locations, we noted an increase of around 20% in one year in our portfolio. In Castellum's entire portfolio, like-for-like increases over the twelve-month period were 5%, of which 3% stemmed from rent increases and the rest primarily from reduced vacancies. - Vacancies are slowly dropping, and the occupancy rate now totals 93.1% — another record for Castellum.

- New profitable project opportunities arise through the high demand for modern, efficient office spaces. In Malmö, Castellum has taken a leading role in the expansion of Nyhamnen with the aforementioned new offices for the Swedish National Courts Administration and E.ON head quarter. Both are fully leased under long-term contracts and entail a total investment of MSEK 2,300. In Gothenburg, the Hisingen Logistics Park (first stage, 30,200 sq. m. and MSEK 244) is fully let; in Stockholm, the old Stockholm Vatten head office on Torsgatan is being developed into modern premises for approx. MSEK 330. - Increasing property values. Our holdings were assessed upward in the period by 4% or MSEK 3,087, due primarily to lowered required yields in the market. Castellum's average valuation yield thereby fell to 5.3%. The logistics portfolio has during the same period increased 9% in value.

Another record

For Castellum, this resulted in a new record quarter - income from property management rose 13% to SEK 2.92 per share, the same rate of increase for the period means that thus far, the figure amounts to SEK 8.12 per share. Adding the growth in value, this resulted in an increased net asset value to SEK 168 per share despite the dividends issued (SEK 2.65 this quarter, SEK 5.30 for the full year). Investment levels remain high (MSEK 3,009) but the loan-to-value ratio has declined further, to 46%.

There are threats

What, then, are the factors that could break this strong trend? In the short term, substantial interest rate hikes are negative for property companies, particularly if not accompanied by inflation. The US usually takes the lead, and when the longterm interest rates start rising — which is happening now the valuation of European companies is also affected. But the US has an almost overheated economy with record low unemployment, which should not be the case for Europe within the foreseeable future. Most are agreed that interest rates should

move upward, but many believe in a long period of relatively low interest rates.

Uncertainty in the banking sector and more difficulty obtaining financing can also have a negative impact. Castellum has increasingly turned to the bond market and, having obtained an investment grade rating, is now preparing to leverage new tools that yield such opportunities as extended loan-tomaturity structures. Bankruptcies involve risk in the form of immediate drops in rental income. The number of bankruptcies in Sweden is rising this year; retail — the sector hardest hit — constitutes a small part of Castellum's portfolio. A number of 'box retail' store locations (durable goods sold in shopping centers located outside population centers) may also be suited for conversion to distribution units in e-commerce.

My assessment is that demand pressure on efficient premises will probably last for another few years. An indication of this is that market has built new offices at a yearly rate of 1–1.5% over the last five years while demand has increased — and continues to increase — by 3–3.5% per year. To ensure growth potential moving forward, Castellum has expanded its sphere of operations to growth cities in the entire Nordic region. We have been in Copenhagen for a long time, we are now in Helsinki as well.

New opportunities

With the rapid pace of change in society and in business models, new opportunities for growth are emerging as well. Co-working is one example. In London, co-working makes up 4% of the total office space, growth is strong, with just over 20% of new leasings. The market for co-working is not as mature in Stockholm, still making up an estimated approx. 1% of total office space — though there is clear growth occurring here as well. Co-working means building more technology and know-how into the property, thus increasing efficiency. For tenants, the need for space and total cost decrease; for the property owner, rent per square meter increases significantly, though with a lower margin. A win-win situation for both partners. The risk of having a co-working setup run by a third partner is that the property owner loses contact with the end customer. That is why Castellum will be launching its own co-working concept early next year, which will mean new opportunities for all our existing tenants as regards access to premises in major cities. Of course, the operations are expected to make a positive contribution to the Group's aggregate earnings.

Meeting our targets

The strong earnings after the third quarter mean that I am now even more convinced that in 2018, Castellum will be able to meet its overall target: an increase in income from property management (and thus the dividend) of 10%.

Gothenburg October 17, 2018

Henrik Saxborn

CEO

Market comments

MASTHUGGET 26:1 , GOTHENBURG LOCATION: On the Masthugg quay, part of RiverCity in central Gothenburg AREA: 4,185 sq.m. COMPLETED: Q1, 2020 INVESTMENT MSEK 211 CERTIFICATION: Miljöbyggnad level Gold and WELL

Construction of the Emigranten Gothenburg office block has begun on a historic site, adjacent to Castellum's existing Amerikahuset property. The building is located in the middle of the Masthuggskajen district, which is a part of the larger RiverCity urban development project.

Swedish, Danish and Finnish economy

The Swedish economy is developing well, with relatively strong GDP growth. Despite some decline in housing construction, the primary contributors include investments and favorable export prospects. A weak krona exchange rate also supports export prospects. According to the September 2018 forecast from the Swedish Central Bank (Riksbanken), however, the GDP growth rate in 2018 is expected to peak at 2.9% and thereafter to decline to approximately 2% during 2019–2020. Lately, consumer confidence has decreased somewhat, and the contribution from private consumption is therefore expected to decrease. This slight downturn may become significant if housing prices continue to fall. The escalation in international trade restrictions, which have been announced and, to some extent already initiated, entails significant latent risks of a reduction in global trade and accordingly, considerable negative consequences for growth going forward, not least for a small export-dependent nation, such as Sweden.

However, the Swedish labor market is still positively affected by the strong business cycle. Unemployment is at its lowest since 2007 and, according to Riksbanken, will remain at a relatively stable level over the next few years. Of late, inflation (CPIF) has followed Riksbanken's longterm target of 2%. Development of the krona exchange rate plays a key role for inflation in Sweden, as a weak exchange rate normally contributes to higher inflation. The krona continued to be weak in Q2 and, if this trend continues, inflation may rise slightly faster than expected.

MACRO INDICATORS - SWEDEN
Unemployment	6.1%	(August 2018)
Inflation	2.5%	(Sept 2018 compared to Sept 2017)
GDP-growth	0.8%	(Q2, 2018 compared to Q1, 2018)

Danish GDP growth is developing well. According to Danmark Nationalbank's forecasts (Sept 2018), GDP is expected to increase by about 1.8% during 2018 and remain close to this growth rate for 2019–2020 as well. The GDP trend is positively impacted by rising housing prices and relatively optimistic consumers, as well as exports. A certain amount of upward wage pressure is expected, but the Harmonized Index of Consumer Prices (HICP) is expected to remain low, around 1.5%, in 2019–2020.

In Finland as well, the GDP growth rate is expected to end up around 1.8% in 2019–2020, which is weaker than the forecast for 2018, which stands at approximately 3% according to the Finnish Ministry of Finance (Sept 2018). Growth is subdued in several areas, but private consumption and exports are still contributing positively. Inflation (CPI) is expected to increase marginally to around 1.5% in 2019– 2020.

Rental market

In Castellum's submarkets in Sweden, the rental market for office space remains positive, driven primarily by a favorable economy, robust demand and a limited selection of office premises. For Q2 2018, top rents (for premises >500 sq. m.) in the CBDs in Stockholm, Gothenburg and Malmö posted year-on-year increases of 13%, 7% and 4% respectively. Record low vacancies in the Stockholm and Gothenburg CBDs have also resulted in strong demand in the inner suburbs, which has resulted in rising rents.

The rental market for warehouses/logistics spaces is positive, with rising rents in the best logistics locations. Strong demand has been noted for warehouse and logistics properties in semi-central locations with good means of transportation and sorting yards ("last-mile" activities), and is primarily being driven by the growth of e-commerce (up

14% year-on-year for Q2 2018). The rental market for office space in Copenhagen is trending positively, with a year-onyear increase in top rents for offices in the CBD of approximately 6% for Q2 2018. This is due to economic growth, falling vacancy rates and increased construction costs that have driven up rent levels in newly produced premises. The high level of access to land and construction rights in and around the city, however, is a limited factor for rent potential.

The rental market for offices in Helsinki has positive momentum, with year-on-year growth in top rents in the CBD of approximately 8% for Q2 2018. High-quality premises in good locations, as well as renovated premises, are enjoying strong demand. The Finnish economy is in a recovery phase after several years of weaker development, which together with a limited selection reduced vacancy levels, above all in the CBD.

Real estate market

For office properties in Sweden, it is expected that the transaction volume on the property market up to and including Q3 2018 will have totaled SEK 103 billion (year-on year 2017: SEK 99 billion; 2016: SEK 127 billion). International investors accounted for a higher share of volume thus far in 2018 (32%) compared with 24% for the same period in 2017. Prices of nearly SEK 130,000 per square meter have been noted in several larger office transactions during 2018, which constitute new top prices on the Swedish property market.

Modern office properties within the CBDs of Stockholm, Gothenburg and Malmö continue to be highly attractive to the investor market. To date in 2018, the required yield for office premises in Castellum's submarkets has posted a general year-on-year decline, primarily for properties with safe cash flows. In general, compound portfolios of property that generate healthy cash flows are also deemed to be of interest on the investor market. It can be added that competition in the investor market in the category of public sector properties is high, with falling required yields.

Warehouse and logistics properties attract a growing number of both domestic and international investors, driven largely by the growth of e-commerce. While demand is high in the investor market, the selection is relatively low, which drives prices up. The required yield in Castellum's logistics strongholds were thus adjusted down in 2018.

The transaction volume in the Danish property market totaled approximately DKK 33 billion in H1 2018 (around DKK 41 billion during the first half of 2017), of which the volume in Greater Copenhagen totaled approximately DKK 19 billion (DKK 23 billion during the first half of 2017). International investors made up around 40% of that volume. Required yield levels in Copenhagen remained stable in 2018.

The transaction volume in the Finnish property market totaled just over EUR 5 billion up to and including Q3 2018. A total volume of EUR 10 billion was achieved for full-year

2017, though approximately half of that volume related to two large transactions. The required yield in the Helsinki CBD and well-positioned office sub-markets such as Ruoholahati continued to decline in 2018. The required yield in the Helsinki CBD has fallen approximately 1.5 percentage points since 2014, and is now on a level with other Nordic capitals.

Interest and Credit market

The Swedish Riksbank continues its focus on inflation, in the form of the CPIF target of 2%, and its expansionary monetary policy.

Since February 2016, when the repo rate was cut to a new historic low of -0.50%, the repo rate has remained unchanged although the repo rate path has gradually been adjusted downward and increases have been postponed. The Riksbanken assessment of September 6, 2018 is that the likelihood has increased of the repo rate being raised 0.25 percentage points in December 2018. It remains to be seen whether a first increase will then be implemented or postponed to a future date if inflation and business cycle prospects were to decline beforehand.

Long-term Swedish interest rates trended upward under a certain amount of volatility during the quarter in light of factors including geopolitical unrest and rising long-term international interest rates. Of particular significance to Castellum, the key five-year swap interest rate was around 0.6%, compared with about 0.5% at the end of 2017 and aorund 0.4% by half year 2018. At the end of the quarter, 3-months STIBOR was -0.38%, which was about 0.05 percentage point higher than at year end, after remaining at around -0.35% for most of the third quarter.

The interest rate differential between long- and shortterm interest rates has decreased marginally, and interest rates remain historically low.

At the end of April, Castellum announced an official credit rating from Moody's. The rating, which is an investment grade rating, is Baa3 with a positive outlook. The rating is expected to allow improved financial flexibility for Castellum and had an immediate beneficial effect on Castellum's borrowing cost in the Swedish bond market.

The availability of bank financing and funding in the Swedish capital market is assessed as remaining favorable.

Credit margins, which have tended to increase slightly in the European capital market, have to date had little impact on the Swedish bond market.

In Denmark, the 3-month Cibor rate has thus far in 2018 remained stable at about -0.3% and is expected to stay relatively stable for the immediate future.

In Finland as well, short-term interest rates are expected to be relatively stable for the immediate future.

Condensed consolidated statement of comprehensive income

MSEK		2018 July-Sept	2017 July-Sept	2018 Jan-Sept	2017 Jan-Sept	Rolling 12 months Oct 17-Sept 18	2017 Jan-Dec
Rental income		1,305	1,182	3,862	3,494	5,151	4,783
Service income		96	121	279	372	306	399
Income	note 2	1,401	1,303	4,141	3,866	5,457	5,182
Operating expenses	note 3	– 160	– 136	– 540	– 505	– 734	– 699
Maintenance	note 3	– 40	– 43	– 116	– 117	– 193	– 194
Ground rents	note 3	– 5	– 7	– 18	– 18	– 23	– 23
Property tax	note 3	– 78	– 75	– 231	– 227	– 309	– 305
Leasing and property administration	note 3	– 93	– 88	– 271	– 268	– 387	– 384
Net operating income		1,025	954	2,965	2,731	3,811	3,577
Central administrative expenses	note 4	– 29	– 31	– 113	– 114	– 161	– 162
Acquisition and restructuring costs		–	–	–	– 5	–	– 5
Net interest expenses	note 5	– 197	– 215	– 633	– 661	– 857	– 885
Income from property management	note 1	799	708	2,219	1,951	2,793	2,525
– of which income from property management*		799	708	2,219	1,956	2,793	2,530
Changes in value	note 6
Properties		2,323	245	3,150	2,069	5,621	4,540
Derivatives		177	52	202	204	245	247
Income before tax		3,299	1,005	5,571	4,224	8,659	7,312
Current tax	note 7	1	– 32	– 2	– 114	16	– 96
Deferred tax	note 7	– 674	– 196	– 518	– 686	– 1,172	– 1,340
Income for the period/year		2,626	777	5,051	3,424	7,503	5,876
Other total net income
Items that can be reclassified to net income
Translation difference of currencies		– 137	27	178	12	238	72
Change in value derivatives, currency hedge		35	– 15	– 146	39	– 265	– 80
Total net income for the period year**		2,524	789	5,083	3,475	7,476	5,868
Average number of shares, thousand		273,201	273,201	273,201	273,201	273,201	273,201
Income, SEK/share		9.61	2.84	18.49	12.53	27.46	21.51

* For calculation, Key financial metrics, page 19.

** Net income and total net income for the period/year is entirely assignable to the parent company's shareholders.

Accounting policies can be found on page 20.

Comparisons, shown in parantheses are made with the corresponding period previous year except in parts describing assets and financing, where comparisons are made with the end of previous year.

Performance analysis Jan-Sept 2018

NOTE 1 Income from property management

Income from property management, i.e. net income excluding transaction and restructuring costs, changes in value and tax for the period January-September 2018 amounted to MSEK 2,219 (1,956), equivalent to SEK 8.12 (7.16) per share - an increase of 13%. Income from property management, rolling four quarters, amounted to MSEK 2,793 (2,529) equivalent to SEK 10.22 per share (9.26) - an increase of 10%.

SEGMENT INFORMATION

	Income		Income from prop.mgmt
MSEK	2018 Jan-Sept	2017 Jan-Sept	2018 Jan-Sept	2017 Jan-Sept
Central	1,023	956	544	512
West	915	850	501	468
Öresund	831	795	440	399
Stockholm-North	1,360	1,265	754	669
Finland	12	-	9	–
Total	4,141	3,866	2,248	2,048

The difference between the income from property management of MSEK 2,248 (2,048) above and the groups accounted income before tax of MSEK 5,571 (4,224) consists of unallocated income from property management of MSEK 29 (– 92), transaction and restructuring costs of MSEK - (– 5), changes in property value of MSEK 3,150 (2,069) and changes in values of derivatives of MSEK 202 (204).

NOTE 2 Income

The Group's income amounted to MSEK 4,141 (3,866) and the average occupancy rate was 93.1% (90.5%) including discounts of MSEK 61 (62). This also includes a lump sum of MSEK 12 (3) as a result of early termination of leases. The decrease like-for-like of 5% can be referred to higher rental levels as well as lower vacancies.

DEVELOPMENT OF INCOME
MSEK	2018 Jan-Sept	2017 Jan-Sept	Change, %
Like-for-like holdings	3,744	3,561	5.1%
Development properties	229	118	–
Transactions	168	187	–
Rental income	4,141	3,866	7.1%

Gross leasing (i.e. the annual value of total leasing) during the period was MSEK 307 (460), of which MSEK 79 (150) were leasing of new constructions, extensions and reconstructions. Notices of termination amounted to MSEK 150 (209), of which bankruptcies were MSEK 10 (6) and MSEK 10 (13) were notices of termination with more than 18 months remaining length of contract. Net lease for the period was MSEK 157 (251). The time difference between reported net leasing and the effect in income thereof is estimated to be between 9-18 months and 12-24 months for investments in new constructions, extension or reconstruction.

Net leasing does not include the year's leasing of MSEK 146 in total regarding new construction for both E.ON and the Swedish National Courts Administration in Malmö, since Castellum is awaiting the final detailed development plan.

NET LEASING

			Region
MSEK	Central	West	Öresund	Sthlm	North	Total
NEW LEASES
Existing properties	81	48	38	49	12	228
Investments	22	27	-	30	-	79
Total	103	75	38	79	12	307
NOTICES OF TERMINATION
Existing properties	- 41	- 32	- 24	- 41	- 2	- 140
Bankruptcies	- 8	- 1	-	- 1	-	- 10
Total	- 49	- 33	- 24	- 42	- 2	- 150
Net leasing	54	42	14	37	10	157

INCOME FROM PROPERTY MANAGEMENT PER SHARE NET LEASING

Property costs amounted to MSEK 1,176 (1,135) corresponding to SEK 360 per sq.m. (347). Property costs increased 5%, which can be explained by colder weather in the first half of the year and warmer weather in the third quarter.

DEVELOPMENT OF PROPERTY COSTS
MSEK	2018 Jan-Sept	2017 Jan-Sept	Change, %
Like-for-like holdings	822	784	4.8%
Development properties	44	34	–
Transactions	39	49	–
Direct property costs	905	867	4.4%
Property admin	271	268	–
Total property costs	1,176	1,135	3.6%

PROPERTY COSTS
	Office	Retail	Light industry	Ware house/ Logistics	Public sector prop.	Total
Operating expenses	210	162	111	108	186	166
Maintenance	50	29	23	22	29	35
Ground rent	3	6	5	8	5	5
Real estate tax	109	60	22	23	83	70
Total prop. costs	372	257	161	161	303	276
Leasing & prop. admin						84
Total	372	257	161	161	303	360

NOTE 4 Central administrative expenses

Central administrative expenses totalled MSEK 113 (114) and has been charged with MSEK 9 (8) for development costs for Castellum's Innovation lab Next 20 - the Group's long-term focus on digitalization. Central administrative expenses also include costs related to the profit-andshare-price related incentive plan for 8 members of Executive Management of MSEK 13 (7).

NOTE 5 Net interest

Net interest items were MSEK - 633 (– 661). The average interest rate level was 2.1% (2.4%). Net interest income was positively affected by approx. MSEK 59 due to the 0.2 percentage point decrease in the average interest rate.

NOTE 6 Changes in value

The property market in 2018 has been marked by demand that has remained healthy, with a high level of activity and thus stable or rising prices. Castellum's change in value for the period amounted to MSEK 3,150. The value changes included MSEK 63, attributable to a property sale of MSEK 447 after the deduction of costs of MSEK 9. Accordingly, the underlying property price was MSEK 456. For properties sold in the first quarter, payment is received in two installments: MSEK – 237, when premises were vacated in the first quarter; and approximately MSEK 50 when the

detailed development plan enters force. For 2018, only the first disbursement has been recognized. Since every property is valuated individually, consideration has not been given to the portfolio premium that can be seen in the real estate market.

The market value of the derivatives changed by MSEK 202 (217) mainly due to changes in long-term market interest rates.

CHANGE IN VALUE PROPERTIES
MSEK	2018 Jan-Sept	2017 Jan-Sept
Cash flow	412	586
Project gains/building rights	367	462
Required yield	2,308	692
Acquisitions	0	298
Sales	63	31
Total	3,150	2,069
D:o %	3.7%	2.7%

NOTE 7 Tax

Current tax is calculated based on a nominal tax rate of 22%, while deferred tax is based on the lower tax rates that apply from 2019 and 2021. Due to the possibility to deduct depreciation and reconstructions for tax purposes, and to utilize tax loss carry forwards, the tax paid is low.

Remaining tax loss carryforwards can be calculated to MSEK 1,261 (2,200). Furthermore, there are derivatives at an undervalue of MSEK 144. Fair values for the properties exceed their fiscal value by MSEK 48,938 (40,324) of which MSEK 4,504 (3,025) relates to the acquisition of properties accounted for as asset acquisitions. As deferred tax liability, a full nominal 20.6% tax of the net difference is reported, reduced by the deferred tax relating to asset acquisitions, i.e., MSEK 8,934 (7,751).

Castellum has no current tax disputes.

Tax proposal

During the first quarter, the government published the "New Tax Rules for the Business Sector" draft bill referred to the Council on Legislation for scrutiny. The bill includes proposals for interest expense deduction limitations pursuant to EU directives, and was adopted on June 13 and will enter force on January 1, 2019. Broadly speaking, the legislation entails a maximum net interest expense deduction of 30% on EBITDA (in Castellum's case, the proposal means profit before tax with the add-back of net interest, changes in value of derivatives and properties, and deductions for tax deductible redevelopments). Moreover, the government proposes a lowered corporate tax, introduced in two steps: 21.4% as of 2019, which will be lowered to 20.6% as of 2021.

Contin. note 7

Today's strong cash flow from operations, combined with historically low interest rates and reduced corporate taxes, mean that interest-rate limitations – in their present format – do not significantly affect Castellum's paid taxes.

TAX CALCULATION 09-30-2018
MSEK	Basis current tax	Basis deferred tax
Income from property management	2,219
Deductions for tax purposes
depreciations	– 804	804
redevelopment	– 434	434
Other tax allowances	– 97	– 133
Taxable income from property mgmt	884	1,105
Current income tax 22%, if tax losses are not utilized	194
Properties sold	101	– 308
Changes in value on properties	–	3,087
Changes in value on derivatives	202	–
Taxable income before tax loss carry forwards	1,187	3,884
Tax loss carry forwards, opening balance	– 2,437	2,437
Tax loss carry forwards, closing balance	1,261	– 1,261
Taxable income	11	5,060
Tax for the period, 22%	– 2	– 1,113
Revaluation of deferred tax	–	595
Tax according to the Income Statement for the period	– 2	– 518

NET DEFERRED TAX LIABILITY 09-30-2018 MSEK Basis Nominal tax liability Real tax liability Tax loss carry forwards 1,261 272 260 Untaxed reserves – 144 – 32 - 32 Properties – 48,938 – 10,102 – 3,065 Total –47,821 – 9,862 – 2,837 Properties, asset acq. 4,504 928 In the balance sheet – 43,317 – 8,934

Deferred tax is in principle both interest free and amortization free and can therefore be considered as shareholder equity. The real deferred tax is lower than nominal partly due to the possibility of selling properties in a tax-efficient way, partly due to the time factor which means that the tax will be discounted.

Estimated real deferred tax liability net has been estimated at 6% based on a discount rate of 3%. Moreover assumptions have been made that tax loss carry forwards are realized in 2 years with a nominal tax of 21.6%, giving a present value for the deferred tax liability of 21%, and that the properties are realized in over 50 years where 33% are sold directly with a nominal tax of 22% and that 67% are sold indirectly through company disposals where the buyers tax discount is 8%. This provides a present value for deferred tax liability of 6%.

Condensed consolidated balance sheet

MSEK		Sept 30, 2018	Sept 30, 2017	Dec 31, 2017
ASSETS
Investment properties	note 8	87,473	77,382	81,078
Goodwill	note 9	1,659	1,659	1,659
Other fixed assets		130	109	107
Current receivables		732	1,244	665
Liquid assets		51	258	203
Total assets		90,045	80,652	83,712
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity		37,371	31,343	33,736
Deferred tax liabilities	note 7	8,934	7,751	8,405
Other provisions		3	5	5
Interest-bearing liabilities	note 10	40,697	38,147	38,226
Derivatives	note 11	1,126	1,365	1,352
Non interest-bearing liabilities		1,914	2,041	1,988
Total shareholders' equity and liabilities		90,045	80,652	83,712
Pledged assets (property mortgages)		26,091	31,040	32,397
Pledged assets (chattel mortgages)		–	–	–
Contingent liabilities		–	–	–

Condensed changes in equity

MSEK	Number of shares, outstanding, thousand	Share capital	Other capital contributions	Currency translation reserve	Currency hedge reserve	Non controlling interest	Retained earnings	Total equity
Shareholders' equity 12-31-2016	273,201	137	12,434	51	– 46	– 2	16,660	29,234
Dividend, March and Sept 2017 (5.00 SEK/share)	–	–	–	–	–	–	- 1,366	- 1,366
Net income Jan-Sept 2017	–	–	–	–	–	–	3,424	3,424
Other total net income Jan-Sept 2017	–	–	–	12	39	–	–	51
Shareholders' equity 09-30-2017	273,201	137	12,434	63	– 7	– 2	18,718	31,343
Net income Oct-Dec 2017	-	–	–	–	–	–	2,452	2,452
Other total net income Oct-Dec 2017	-	–	–	60	– 119	–	–	– 59
Shareholders' equity 12-31-2017	273,201	137	12,434	123	– 126	– 2	21,170	33,736
Dividend March and Sept 2018 (5.30 SEK/share)	–	–	–	–	–	–	1,448	1,448
Net income Jan-Sept 2018	–	–	–	–	–	–	5,051	5,051
Other total net income Jan-Sept 2018	–	–	–	178	- 146	–	–	32
Shareholders' equity 09-30-2018	273,201	137	12,434	301	- 272	- 2	24,773	37,371

Balance sheet September 30, 2018

NOTE 8 Property portfolio and property value

Investment properties

The property portfolio is located in growth areas in Sweden, Copenhagen and Helsinki. The commercial portfolio consists of 46% office, 23% public sector properties, 15% warehouse/logistics, 9% retail and 3% light industry. Property locations range from inner city sites to well-situated working-areas with good public transportation and services. The remaining 4% consist of developments and undeveloped land.

Castellum owns approx. 825,000 sq.m. of unutilized building rights and furthermore ongoing developments with remaining investments of approx. SEK 1.7 billion.

Investments

During the period, investments totalling MSEK 3,456 (5,432) were carried out, of which MSEK 1,333 (3,452) were acquisitions and MSEK 2,123 (1,980) new developments, extensions and redevelopments. After sales and cash settlement of MSEK 447 (872) net investments amounted to MSEK 3,009 (4,560).

CHANGES IN THE PROPERTY PORTFOLIO

	Value, MSEK	Number
Property portfolio on January 1, 2018	81,078	676
+ Acquisitions	1,333	9
+ New developments, extensions and redevelopments	2,123	7
- Sales	– 384	– 4
+/- Unrealized changes in value	3,087	–
+/- Currency translation	236	–
Property portfolio on Sept 30, 2018	87,473	688

INVESTMENTS PER REGION

Property value

Internal valuations

Castellum assesses the value of the properties through internal valuations, as in previous years, corresponding to level 3 in IFRS 13. The valuations are based on a 10-year cash flow based model with individual valuation for each property in terms of both its future earnings capacity and the required market yield. In assessing a property's future earnings capacity, consideration has been taken of potential changes in rental levels, occupancy rates and property costs - as well as an assumed inflation level of 1.5%.

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 1,480 (1,800) 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 been historically small. Based on these internal valuations, property value at the end of the period was assessed at MSEK 87,473 (77,382), corresponding to SEK 19,300 per sq.m.

Average valuation yield

The average valuation yield for Castellum's real estate portfolio, excluding development projects and undeveloped land, can be calculated at 5.3% (5.5%).

AVERAGE VALUATION YIELD (excl. developments/land and building rights ) MSEK

Average valuation yield	5.3%
Valuation (excl. building rights of MSEK 617)	82,896
Normalized net operating income (9 months)	3,325
- Property admin, SEK 30/sq.m.	- 102
+ Property cost annual rate	0
+ Real occupancy rate, 94% at the lowest	154
Net operating income properties	3,273

KEY PROPERTY RELATED METRICS

	2018 Jan-Sept	2017 Jan-Sept	2017 Jan-Dec
Rental value, SEK/sq.m.	1,383	1,338	1,341
Economic occupancy rate	93.1%	90.5%	90.9%
Property costs, SEK/sq.m.	360	347	366
Net operating income, SEK/sq.m.	1,011	863	853
Property value, SEK/sq.m.	19,333	17,569	18,268
Number of properties	688	675	676
Leasable area, thousand sq.m.	4,435	4,375	4,381
Average valuation yield	5.3%	5.8%	5.5%

Castellum's property portfolio

			09-30-2018	January-September 2018
	No. of proper	Area thou sand	Property value	D:o/	Rental value	D:o/	Occup ancy	Income	Property costs	D:o/	Net operating income
Category	ties	sq.m.	MSEK	sq.m.	MSEK	sq.m.	rate	MSEK	MSEK	sq.m.	MSEK
OFFICE Stockholm	31	291	9,991	34,357	456	2,089	93.8%	427	84	385	343
West	67	386	9,170	23,735	441	1,523	92.8%	410	92	316	318
Central	78	510	8,768	17,210	534	1,398	93.4%	499	133	349	366
Öresund	47	403	10,230	25,378	590	1,951	87.4%	515	131	434	384
North	11	66	1,273	19,421	78	1,574	85.9%	66	18	363	48
Finland	1	14	823	56,994	38	3,538	99.6%	38	8	725	30
Total Office	235	1,670	40,255	24,109	2,137	1,706	91.5%	1,955	466	372	1,489
PUBLIC SECTOR PROPERTIES
Stockholm	14	99	5,380	54,454	197	2,665	97.1%	192	31	425	161
West	17	122	2,260	18,568	116	1,267	97.1%	112	21	229	91
Central	24	241	5,647	23,410	292	1,613	97.4%	284	55	304	229
Öresund	8	91	3,169	34,781	144	2,110	97.8%	141	16	234	125
North	14	176	3,845	21,815	207	1,564	96.2%	199	42	319	157
Total Public sector properties	77	729	20,301	27,844	956	1,748	97.1%	928	165	303	763
WAREHOUSE /LOGISTICS
Stockholm	41	273	4,413	16,161	233	1,136	94.4%	220	37	179	183
West	73	556	5,317	9,562	311	747	90.5%	282	60	144	222
Central	34	208	1,620	7,800	123	789	92.0%	113	25	162	88
Öresund	30	212	1,726	8,129	124	781	87.9%	109	29	179	80
Total Warehouse/Logistics	178	1,249	13,076	10,468	791	845	91.5%	724	151	161	573
RETAIL
Stockholm	35	198	3,788	19,136	208	1,404	94.7%	197	30	207	167
West	17	78	1,075	13,789	70	1,195	95.8%	67	17	284	50
Central	20	95	1,543	16,227	90	1,261	97.1%	87	19	273	68
Öresund	11	45	834	18,311	51	1,486	92.0%	47	12	342	35
North	3	18	333	18,849	20	1,540	86.8%	18	6	400	12
Total Retail	86	434	7,573	17,441	439	1,349	94.7%	416	84	257	332
LIGHT INDUSTRY
Stockholm	13	53	770	14,474	46	1,160	93.0%	43	8	194	35
West	19	89	811	9,172	53	793	94.8%	50	9	142	41
Central	14	54	414	7,683	33	814	96.1%	32	8	190	24
Öresund	4	42	313	7,451	24	771	81.4%	20	4	121	16
Total Light industry	50	238	2,308	9,717	156	876	92.4%	145	29	161	116
Total investment properties	626	4,320	83,513	19,333	4,479	1,383	93.1%	4,168	895	276	3,273
Leasing and property admin									271	84	– 271
Total after leasing and property admin									1,166	360	3,002
Development	37	115	3,419	–	72	–	–	39	19	–	20
Undeveloped land	25	–	541	–	–	–	–	–	–	–	–
Total	688	4,435	87,473	–	4,551	–	–	4,207	1,185	–	3,022

The table above relates to the properties owned by Castellum at the end of the period and reflects the income and costs of the properties as if they had been owned during the period. The discrepancy between the net operating income of MSEK 3,022 accounted for above and the net operating income of MSEK 2,965 in the income statement is explained by the deduction of the net operating income of MSEK 3 on properties sold during the year, as well as the adjustment of the net operating income of MSEK 60 on properties acquired/completed during the year, which are recalculated as if they had been owned or completed during the whole period.

More detailed description about property type on page 24, definitions. Castellum's property portfolio with new categories can be accessed from Q4, 2017 via: castellum.com.

PROPERTY VALUE BY PROPERTY TYPE PROPERTY VALUE BY REGION

Customers

Castellum's property portfolio and customer segments

Castellum's property portfolio is well distributed over various segments, whereby almost half consist of office buildings and a quarter comprises public sector properties. The latter provide a stable and secure income base, in the form of customers as well as longer contract durations. Castellum's exposure to the retail segment currently represents 9% of income value, but this segment includes grocery stores and car dealerships. The latter are in locations that are becoming more attractive from a logistics perspective. Another type of retail exposure also occurs in the warehouse/logistics segment, in the form of storage and distribution from the rapidly-growing e-commerce segment, which favours rental growth and contributes to the transformation of well-located properties for the last mile.

Lease maturity structure

Contract maturity for Castellum's portfolio are shown in the table below.

LEASE MATURITY STRUCTURE 09-30-18
MSEK	No. of leases	Lease value MSEK	Percentage of value
Commercial, term
2018	211	17	0%
2019	2,199	774	14%
2020	1,429	1,013	18%
2021	1,226	966	17%
2022	668	767	14%
2023+	542	1,860	34%
Total commercial	6,275	5,397	97%
Residential	464	41	1%
Parking spaces and other	6,245	92	2%
Total	12,984	5,530	100%

Risk exposure, credit risk

Castellum's lease portfolio features a good risk exposure. The Group has approx. 6,300 commercial leases and 464 residential leases, and their distributiin terms of size is presented in the table below. The single largest lease as well as the single largest customer accounts for approx. 2% of the Group's total rental income, meaning that Castellum's exposure to a single- customer credit risk is very low.

LEASE SIZE
Lease size, MSEK	No. of leases	Share	Lease value MSEK	Share
Commercial
< 0.25	3,062	24%	245	4%
0.25-0.5	1,057	8%	385	7%
0.5-1.0	841	6%	594	11%
1.0-3.0	773	6%	1,310	23%
< 3.0	542	4%	2,863	52%
Total	6,275	48%	5,397	97%
Residential	464	4%	41	1%
Parking spaces and other	6,245	48%	92	2%
Total	12,984	100%	5,530	100%

CASTELLUM INTERIM REPORT JANUARY-SEPTEMBER 2018 CASTELLUM INTERIM REPORT 2018

Castellum's development portfolio

Larger investments and sales

Larger developments

	Rental value			Total inv.	Of which
Property	Area sq.m.	MSEK	SEK/sq.m.	Econ.occup. Oct 2018	incl. land, MSEK	inv. 2018, MSEK	Remain inv.MSEK	Completed	Category
Olaus Petri 3:244, Örebro	14,526	36	2,400	97%	465	185	140	Q2 2019	New construction office
Smygmaskan 1, Malmö	9,600	26	2,700	65%	352	90	171	Q2 2019	New construction office
Spejaren 4, Huddinge	9,300	25	2,700	45%	349	166	148	Q1 2019	New construction car retail
Sabbatsberg 24, Stockholm	9,092	45	4,950	28%	329	71	241	Q2 2020	Reconstruction office
Masthugget 26:1, Gothenburg	4,185	13	3,200	0%	211	29	180	Q1 2020	New construction office
Generatorn 1, Mölndal	6,800	13	1,600	100%	141	65	67	Q3 2019	New construction office/ warehouse
Tibble 1:647, Brunna	8,894	12	1,300	0%	140	73	67	Q2 2019	New construction warehouse/ light industry
Backa 20:5, Gothenburg	3,500	7	1,950	100%	103	38	65	Q1 2019	New construction car retail
Developments completed/partly moved in
Hisingen Logisticspark, Gothenburg	30,200	22	750	100%	244	76	20	Q2 2018	New construction logistics
Balltorp 1:124, Mölndal	18,000	15	850	100%	197	17	0	Q1 2018	New construction logistics
Varpen 11, Huddinge	5,555	15	2,550	100%	194	29	24	Q1 2018	New construction car retail
Rosersberg 11:130, Sigtuna	12,200	12	1,000	97%	132	26	5	Q3 2018	New construction logistics
Spiran 12, Norrköping	7,915	18	2,300	46%	110	25	18	Q3 2018	Reconstruction office
Söderhällby 2:1, Uppsala	5,963	8	1,300	100%	101	29	1	Q1 2018	New construction logistics
Total developments > MSEK 100					3,068	919	1,147

Larger acquisitions during 2018

	Rental value
Property	Area, sq.m	MSEK	SEK/sq.m	Econ. occup. July 2018	Acquisition SEKm	Access	Category
Salmisaarenaukio 1, Helsinki	14,433	52	3,550		100% 81 million EUR	June 2018	Office
Bägaren 3, 5 and 6, Norrköping, Dolken 5, Linköping and Klio 10, Västerås	20,474	25	1,250	97%	251	Sept 2018	Office
Dragarbrunn 19:1, Uppsala	2,964	10	3,350	99%	127	April 2018	Retail

NOTE 9 Goodwill

In 2016, the CORHEI and Norrporten companies were acquired in connection with the acquisitions goodwill arose, primarily related to the difference between nominal tax, and the calculated supplementary tax which was applied at time of acquisition. The goodwill action is thereby connected to deferred tax. A write-off for goodwill is primarily justified for a major downturn in the real estate market or a situation wherein properties included in the transaction above are divested. As per September 30, 2018, there was no indication that a write-down will be necessary.

NEW SWEDISH NATIONAL COURTS ADMINISTRATION, MALMÖ LOCATION: Nyhamnen, city centre, Malmö

AREA: 25,000 sq.m. COMPLETED: during 2021 INVESTMENT: MSEK 1,200 CERTIFICATION: Miljöbyggnad level Guld

A rental agreement has been signed between the Swedish National Courts Administration and Castellum which starts the planning of new construction of 25 000 sq.m. modern courtroom premises in the centrally situated Nyhamnen area of Malmö. The investment is calculated at approx. SEK 1.1 billion and constitutes a significant part of Castellum's strategy towards further growth in the Öresund area and is one of Castellum's

Castellum must maintain a low level of financial risk. In April 2018, a decision was made to adjust the LTV policy, meaning a medium- to long-term LTV ratio of less than 50% (previously 55%). The interest coverage ratio remained at not less than 200%.

Interest bearing liabilities

At the end of the period, Castellum had credit agreements totaling MSEK 54,683 (57,240), of which MSEK 33,714 (45,120) was long-term and MSEK 20,969 (12,120) shortterm. Of the utilized borrowing facilities at the end of the period, MSEK 26,074 (26,904) was long-term and MSEK 14,572 (11,119) short-term. In 2018, the volume of secured bank credit facilities was reduced by terminating credit agreements of MSEK 6,500. Bank credit facilities of approximately MSEK 7,100 have been renegotiated and extended, which has resulted in more favorable financing terms. In addition, a MEUR 75 loan agreement with the European Investment Bank (EIB) was utilized. The loan carries a nominal value of MSEK 756 and runs for five years. At the beginning of the year, the framework amount in Castellum's MTN program was raised to MSEK 18,000 and MSEK 10,000 in the commercial paper program. Castellum was active in the bond market in the third quarter as well, while the volume of certificates outstanding was further reduced from previous record levels current at the beginning of 2018.

During the first nine months of the year, bonds at a nominal value of MSEK 1,550 matured while new bonds for MSEK 4,375 were issued. Additional bonds of MSEK 200 were issued after the end of the period.

After deduction of cash of MSEK 51 (203), net interestbearing liabilities were MSEK 40,646 (38,023), of which MSEK 16,992 (14,162) were MTNs and MSEK 8,239 (7,994) commercial paper outstanding (nominal MSEK 17,000 and MSEK 8,242 respectively).

Most of Castellum's bank facilities are revolving credit facilities, which means great flexibility. Bonds issued under the MTN program and commercial paper broaden the funding base, and comprise the majority of the utilized borrowing facilities. At the end of the period, the fair value of liabilities essentially corresponded with the carrying amounts.

Long-term loan commitments in banks are normally secured by pledged property deeds. Issued commercial paper and bonds are unsecured. Undertakings to meet specific financial ratios are included as covenants under certain financing agreements.

Net interest-bearing liabilities amounted to MSEK 40,646 (38,023), of which MSEK 14,659 (15,867) was secured

against property deeds and MSEK 25,987 (22,156) was unsecured, which means that approximately 36% of loans outstanding were secured. The proportion of secured financing, with the addition of commercial paper outstanding backed by secured bank credit commitments, used was thus 26% of the properties' value. Castellum's unsecured assets totaled 43% at the end of the period. The financial covenants stipulate an LTV ratio not exceeding 65% and an interest coverage ratio of at least 150%, which Castellum fulfils with comfortable margins: 46% and 451% respectively. The average duration of Castellum's credit agreements was 2.7 years (2.7). Margins and fees on long-term credit agreements had an average duration of 2.2 years (2.2).

At the end of April, Castellum announced an official credit rating from Moody's. The rating, which is an Investment Grade rating, is Baa3 with a positive outlook. The rating is expected to result in further improvements to financial flexibility for Castellum by supporting both Castellum's relative funding cost and access to loan capital over time.

CREDIT MATURITY STRUCTURE 09-30-2018

		Utilized in
Credit agreements	MSEK	Bank	MTN/Cert	Total
0 - 1 year	20,969	2,834	11,738	14,572
1 - 2 years	5,833	1,996	3,547	5,543
2 - 3 years	11,872	2,020	2,552	4,572
3 - 4 years	8,611	4,620	3,941	8,561
4 - 5 years	4,890	2,637	2,253	4,890
> 5 years	2,508	1,308	1,200	2,508
Total	54,683	15,415	25,231	40,646

Interest rate maturity structure

In order to secure a stable and low net interest cash flow the interest rate maturity structure is distributed over time. The average fixed interest term was 2.3 years (2.4). The average effective interest rate as per of Sept 30, 2018 was 2.1% (2.4%). Castellum utilizes interest rate derivatives to achieve the desired interest rate maturity structure. Interest rate derivatives is a cost efficient and flexible way to achieve the desired fixed 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 and fees are distributed in the table by reported underlying loans, while credit fees are reported in the segment for 0-1 year.

Currency

Castellum owns properties in Denmark and Finland with a value of MSEK 6,833 (5,671), which means that the Group is exposed to currency risk. The currency risk is primarily related to when income statement and balance sheet in foreign currencies are translated into Swedish kronor.

DISTRIBUTION OF INTEREST BEARING LIABILITIES 09-30-2018

SECURED CREDIT FACILITIES 09-30-2018

					Derivatives
	Credit, MSEK	Closing average interest rate	Volume fixed interest rate, MSEK	Closed fixed interest rate**	Volume variable interest rate MSEK***	Closing variable interest rate***	Closing interest rate	Average fixed interest rate term
0 - 1 year	32,297	0.9%	2,350	1.5%	– 19,455	– 0.2%	2.3%	0.2 years
1 - 2 years	1,900	1.3%	4,255	1.6%	–	–	1.5%	1.6 years
2 - 3 years	3,901	1.4%	2,750	2.5%	–	–	1.9%	2.5 years
3 - 4 years	1,500	2.1%	2,450	1.1%	–	–	1.5%	3.4 years
4 - 5 years	749	1.7%	2,300	2.8%	–	–	2.5%	4.5 years
5 - 10 years	299	2.3%	5,350	2.4%	–	–	2.6%	6.8 years
Total	40,646	1.0%	19,455	2.0%	– 19,455	– 0.2%	2.1%	2.3 years

INTEREST RATE MATURITY 09-30-2018

* Including credit-agreement fees and exchange rate differences for MTNs

** Castellum pays fixed interest rates

*** Castellum receives interest rates

NOTE 11 Interest rate and currency derivatives

Castellum utilizes interest rate derivatives to achieve the desired interest rate maturity structure. According to the accounting standard IFRS 9, derivatives are subject to market valuation. If the agreed interest rate deviates from the market interest rate, notwithstanding credit margins, there is a theoretical surplus or sub value in the interest rate derivatives where the non-cash-flow affecting changes in value are reported in the income statement. At maturity, a derivative's market value is dissolved in its entirety and the change in value over time has thus not affected equity. Castellum also has derivatives in order to hedge currency fluctuation in its investment in Denmark and Finland. 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.

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 flows to present value while instruments containing options are valued at current repurchase price.

As of September 30, 2018, the market value of the interest rate derivatives portfolio amounted to MSEK – 1,091 (– 1,299) and the currency derivative portfolio to MSEK – 35 (- 53). All derivatives are, as at previous year, classified in level 2 according to IFRS 13.

CASTELLUM'S FINANCIAL POLICY AND COMMITMENTS IN CREDIT AGREEMENTS

	Policy	Commitment	Outcome
Loan to value ratio	Not exceeding 50%	Not exceeding 65%	46%
Intererst coverage ratio	At least 200%	At least 150%	451%
Funding risk
– average capital tied up	At least 2 years		2.7 years
– proportion maturing within 1 year	No more than 30% of outstanding loans and unutilized credit agreements		29%
– average maturing credit price	At least 1.5 years		2.2 years
– liquidity reserve	Secured credit agreements corresponding to MSEK 750 and 4.5 months upcoming loan maturities		Achieved
Interest rate risk
– average interest duration	1.5 - 3.5 years		2.3 years
– proportion maturing within 6 months	No more than 50%		33%
Credit and counterparty risk
– rating restriction	Credit institutions with high ratings, at least S&P BBB+		Achieved
Currency risk
– translation exposure	Shareholders' equity is not secured		Not secured
– transaction exposure	Handled if exceeding MSEK25		Less than MSEK 25

Condensed consolidated cash flow statement

MSEK	2018 July-Sept	2017 July-Sept	2018 Jan-Sept	2017 Jan-Sept	Rolling 12 months Oct 17-Sept 18	2017 Jan-Dec
Net operating income	1,025	954	2,965	2,731	3,811	3,577
Central adminstrative expenses	– 29	– 31	– 113	– 114	– 161	– 162
Reversed depreciation	5	2	14	7	21	14
Net interest rate paid	– 190	– 199	– 636	– 657	– 857	– 878
Tax paid	70	– 12	62	44	15	– 3
Translation differences of currencies	– 11	48	25	33	– 16	– 8
Cash flow from operating activities before change in working capital	870	762	2,317	2,044	2,813	2,540
Change in current receivables	12	– 124	– 183	– 243	– 14	– 74
Change in current liabilities	51	– 259	– 152	– 421	46	– 223
Cash flow from operating activities	933	379	1,982	1,380	2,845	2,243
Investments in new developments, extensions and redevelopments	– 727	– 624	– 2,164	– 1,980	– 3,077	– 2,893
Property acquisitions	– 314	– 103	– 1,333	– 3,452	– 1,476	– 3,595
Change in liabilities on acquisitions of property	25	72	17	344	– 315	12
Property sales	60	16	447	872	450	875
Change in receivables on sales of property	2	– 42	15	4,546	425	4,956
Other investments	– 14	– 14	– 46	– 27	– 67	– 48
Cash flow from investment activities	– 968	– 695	– 3,064	303	– 4,060	– 693
Change in long term liabilities	726	934	2,369	– 320	2,448	– 241
Change in short term liabilities	–	–	9	4	8	3
Dividend paid	– 724	– 683	– 1,448	– 1,366	– 1,448	– 1,366
Cash flow from financing activities	2	251	930	– 1,682	1 ,008	– 1,604
Cash flow for the period/ year	– 33	– 65	– 152	1	– 207	- 54
Liquid assets opening balance	84	323	203	257	258	257
Liquid assets closing balance	51	258	51	258	51	203

The Parent company

Condensed Income statement

Total net income for the period/year	133	37	70	129
Unrealized change, currency hedge	31	8	– 100	– 1
Items that will be reclassified into net income Translation difference foreign operations	– 31	– 8	100	1
Net income for the the period/year	133	37	70	129
Comprehensive income for the parent company
Net income for the period/year	133	37	70	129
Tax	– 38	– 11	– 20	– 36
Income before tax	171	48	90	165
Change in derivatives	181	67	156	257
Net financial items	15	8	17	10
Operating expenses	– 41	– 36	– 133	– 125
Income	16	9	50	23
MSEK	2018 July-Sept	2017 July-Sept	2018 Jan-Sept	2017 Jan-Sept

Condensed Balance sheet
MSEK	Sept 30 2018	Sept 30 2017	Dec 31 2017
Participations, Group companies	19,675	19,762	19,161
Receivables, Group companies	30,627	29,741	30,914
Other assets	7,843	4,958	8,206
Liquid assets	0	0	0
Total	58,145	54,461	58,281
Shareholders' equity	16,415	16,564	17,794
Derivatives	1,126	1,365	1,352
Interest bearing liabilities	36,915	33,962	34,303
Interest bearing liabilities, Group companies	3,540	2,426	4,687
Other liabilities	149	144	145
Total	58,145	54,461	58,281
Pledged assets (receivables Group contributions)	21,486	26,118	27,688
Contingent liability (guaranteed commitments for subsidiaries)	3,624	3,710	3,609

Opportunities and risks for the 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 inflation, which is expected 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 increased inflation.

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 term may occur at different points in time.

SENSITIVITY ANALYSIS - CASH FLOW Effect on income next 12 months

	Effect on income, MSEK +/- 1% (units)	Probable scenario Boom Recession
Rental level/index	+56/–56	+	–
Vacancies	+60/–60	+	–
Property costs	-16/+16	–	0
Interest costs	-104/+47	0	–

Opportunities and risks in property values

Castellum reports its properties at fair value together with changes in value in the income statement. This means that the result in particular but also the financial 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. 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 trend in net operating income results in an upward adjustment in prices, while a negative trend has the opposite effect.

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

SENSITIVITY ANALYSIS - CHANGE IN VALUE
Properties	-20%	-10%	0%	+10%	+20%
Changes in value, MSEK	– 17,495	– 8,747	–	8,747	17,495
Loan to value ratio	58%	52%	46%	42%	39%

Financial risk

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

For more detailed information about risks and uncertainties visit Castellum's website or Castellum's Annual Report 2017, "Risk and Risk management" on pages 88-95.

Castellum is the most sustainable property company in the Nordic region In the third quarter, Castellum continued to garner international attention for its sustainability efforts. Castellum is maintaining its position as the only Nordic property and construction company on the Dow Jones Sustainability Index, which contains 3,500 listed companies representing every industry around the world. In addition, for the third year in a row, Castellum was named a global sector leader in the Global Real Estate Sustainability Benchmark (GRESB), which means Castellum ranks first in the world in the office and industrial premises sector. Castellum also received the EPRA Gold Award for the highest rating among the best sustainability reports in Europe.

During this period Castellum was also the first property company in the Nordic region to have its climate targets approved by the Science Based Targets (SBT) initiative. Castellum's target is to achieve 100% climate neutrality in its operations by 2030, thereby supporting the UN's climate agreement and the national ambition for a fossil free Sweden.

Since 2007, Castellum's carbon emissions have decreased by 78%, and SBT's approval is an important part of Castellum's ambition to be climate neutral by 2030.

Up through September 2018, 30% of Castellum's property holdings have been environmentally certified, and the company is working actively to attain several challenging sustainability goals, including a company with full gender equality in all occupational categories. Sustainability, especially from a social perspective, has been a priority at Castellum since the company was formed. Since 2012, Castellum has had a program for interns, which covers four percent of our employees. Of that group, three quarters were employed by different companies after their internships.

Castellum has also completed the first WELL certification in Sweden through certifying the company's Stockholm office. WELL is the only certification system that takes into account the health and well-being of the people who work in a property.

Key Financial Metrics

A number of the financial measures presented by Castellum in the interim report are not defined in accordance with IFRS accounting standards. However, the company believes that these measures provide useful supplementary information to both investors and Castellum management, as they facilitate evaluation of company performance. It is to be noted that, since not all companies calculate financial measurements in the same manner, these are not always comparable to measurements used by other companies. Hence, these financial measures should not be seen as a substitute for measures defined according to IFRS. Unless otherwise stated, the table below presents measures, along with their reconciliation, whichare not defined according to IFRS. Definitions for these measures appear on page 24.

	July-Sept 2018	July-Sept 2017	Jan-Sept 2018	Jan-Sept 2017	Rolling 12 months Oct 17- Sept 18	Jan-Dec 2017
Average number of shares, thousand (related to key financial metrics)	273,201	273,201	273,201	273,201	273,201	273,201
Outstanding nu,ber of shares, thousand (related to balance sheet ratios)	273,201	273,201	273,201	273,201	273,201	273,201

Income from property management

Castellum's operations are focused on cash-flow growth from ongoing management operations – i.e. income growth from property management – the prime yearly objective being a 10% increase of income from property management. Income from property management also forms the basis of the annual shareholder dividend: at least 50% of income from property management. Income from property management is calculated before paid tax, as well as after the theoretical tax that Castellum would have paid on income from property management, had there been no loss carry forwards.

		July-Sept 2018 MSEK SEK/share		July-Sept 2017 MSEK SEK/share		Jan-Sept 2018 MSEK SEK/share		Jan-Sept 2017 MSEK SEK/share		Rolling 12 months Oct 17- Sept 18 MSEK SEK/share	MSEK SEK/share	Jan-Dec 2017
Income before tax	3,299	12.08	1,005	3.68	5,571	20.39	4,224	15.46	8,659	31.69	7,312	26.76
Reversed:
Transaction and restructuring costs	–	–	–	–	–	–	5	0.02	–	–	5	0.02
Changes in value, properties	– 2,323	– 8.50	– 245	- 0.90	– 3,150	– 11.53	– 2,069	– 7.57	– 5,621	- 20.57	– 4,540	– 16.62
Changes in value, derivatives	– 177	– 0.65	– 52	– 0.19	– 202	– 0.74	– 204	– 0.75	– 245	– 0.90	– 247	– 0.90
= Income from property management	799	2.93	708	2.59	2,219	8.12	1,956	7.16	2,793	10.22	2,530	9.26
EPRA Earnings (Income from property mgmt)
Income from property management	799	2.92	708	2.59	2,219	8.12	1,956	7.16	2,793	10.22	2,530	9.26
Reveresed; Current tax income from property management	– 86	- 0.31	– 103	– 0.38	– 194	– 0.71	– 240	– 0.88	– 193	– 0.70	– 239	– 0.87
EPRA Earnings / EPRA EPS	713	2.61	605	2.21	2,025	7.41	1,716	6.28	2,600	9.52	2,291	8.39

Net Asset Value

Net asset value is the total equity that the company manages for its owners. Based on this equity, Castellum wants to create return and growth at a low level of risk. Net asset value can be calculated both long and short term. Long-term net asset value is based on the balance sheet, with adjustments for items that will not lead to any short-term payment. In Castellum's case, these would include such things as goodwill, derivatives and deferred tax liability. Actual net asset value is equity according to the balance sheet, adjusted for the market value of the deferred tax liability.

	Sept 30, 2018 MSEK SEK/share		Sept 30, 2017 MSEK SEK/share		MSEK SEK/share	Dec 31, 2017
Equity according to the balance sheet	37,371	137	31,343	115	33,736	123
Reversed:
Derivatives according to balance sheet	1,126	4	1,365	5	1,352	5
Goodwill according to balance sheet	– 1,659	– 6	– 1,659	– 6	– 1,659	– 6
Deferred tax according to balance sheet	8,934	33	7,551	28	8,405	31
Long term net asset value (EPRA NAV)	45,772	168	38,880	142	41,834	153
Deduction
Derivatives as above	– 1,126	– 4	– 1,365	– 5	– 1,352	– 5
Estimated real liability, deferred tax 7% (2017: 6%)*	– 2,837	– 11	– 2,602	– 10	– 2,850	– 10
Short term net asset value (EPRA NNNAV)	41,809	153	34,833	127	37,632	138

* Estimated real deferred tax liability net has been calculated to 7% based on a discount rate of 3%. Further, assessments have been made that tax loss carry forwards are realized in 2 years with a nominal tax of 21.4%, giving a present value of deferred tax liability of 21%, and that the properties are realized in 50 years where 33% are sold directly with a nominal tax of 20.6% and that 67% are sold indirect through company disposals where the buyers tax discount is 8%, which gives a present value of deferred tax liability of 7%.

Cont. Financial Key Ratios

Financial risk

Castellum's strategy is to own, develop and manage properties at low financial risk. This is expressed in a loan-to-value ratio not permanently exceeding 50% and an interest-coverage ratio of at least 200%.

Interest coverage ratio	July-Sept 2018	July-Sept 2017	Jan-Sept 2018	Jan-Sept 2017	Rolling 12 months Oct 17-Sept 18	Jan-Dec 2017
Income from property management	799	708	2,219	1,956	2,793	2,530
Reversed;
Net interest	197	215	633	661	857	885
Income from property management excl. net interest	996	923	2,852	2,617	3,650	3,415
Interest coverage ratio	506%	429%	451%	396%	426%	386%
Loan to value ratio			Sept 30, 2018	Sept 30, 2017		Dec 31, 2017
Interest-bearing liabilities			40,697	38,147		38,226
Liquid assets			– 51	– 258		- 203
Net interest-bearing liabilities			40,646	37,889		38,023
Investment properties			87,473	77,382		81,078
Acquired properties not taken into possession			– 40	– 355		- 23
Divested properties still in Castellum's possession			–	425		15
Net investment properties			87,433	77,452		81,070
Loan to value ratio			46%	49%		47%

Investment

In order to achieve the overall objective of 10% growth, i. e. income from property management per share, annual net investments of at least 5% of the property value will be made.

Net sales prices – 60 - 16 – 447 – 872 – 450 - 875 Net investments 940 711 3,009 4,560 4,062	5,613

Other key financial metrics

	July-Sept 2018	July-Sept 2017	Jan-Sept 2018	Jan-Sept 2017	Rolling 12 months Oct 17-Sept 18	Jan-Dec 2017
Net operating income margin	73%	73%	72%	71%	70%	69%
Interest rate level, on average	2.1%	2.4%	2.2%	2.4%	2.3%	2.4%
Return on long term net asset value	28.1%	9.7%	17.5%	12.1%	22.1%	19.6%
Return on actual net asset value	29.9%	10.2%	20.3%	9.9%	24.7%	18.3%
Return on total capital	15.2%	5.8%	9.4%	8.0%	11.2%	10.1%
Return on equity	30.2%	10.2%	20.4%	16.0%	24.5%	20.6%
Property value, SEK/share	320	283	320	283	320	297
Gross leasing	75	111	307	460	447	600
Net leasing	29	52	157	251	216	310

Accounting policies

Castellum complies with the IFRS standards adopted by the EU. This interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and the Annual Accounts Act. Disclosures in accordance with IAS 34 Interim Financial Reporting are provided in notes and elsewhere in the half-year report.

On January 1, 2018, IFRS 15 Revenue from Contracts with Customers came into effect. Castellum's revenue is largely regulated by IAS 17 Leasing, with the exception of the imposition of certain revenues, which are regulated by IFRS 15. The former includes customary rent including index, additional charges for investments, and property tax; the latter refers to all other additional charges such as heat, cooling, waste disposal, water, snow removal, etc. Thus, the adoption of IFRS 15 means that Castellum's revenues should be divided into two parts – Rental income

and Service revenues. Consequently, there will be no impact on revenue or income before tax. Comparative periods have been recalculated. In addition, IFRS 9 came into effect on January 1, 2018, thereby replacing IAS 39. The standard introduced new principles for the classification of financial assets, hedge accounting, and credit-loss reserves. The single largest item within the scope of IFRS 9 that affects Castellum consists of derivatives that are still reported at fair value in the income statement. Furthermore, the hedge accounting of net investments in Denmark is still considered effective under the new standard. Hence, IFRS 9 has no impact on either Castellum's income statement or balance sheet.

Otherwise, accounting policies and calculation methods remain unchanged compared to last year's Annual Report.

Election Committee

At Castellum AB's Annual General Meeting held on March 22, 2018, it was resolved that the Election Committee for the Annual General Meeting 2019 should consist of the Chairman of the Board of Directors and a member appointed by each of the three largest ownership registered or otherwise known shareholders, as per the last trading day of August 2018. If such a shareholder should not wish to appoint a member, the fourth largest shareholder should be consulted, and so on.

Castellum's Chairman of the Board has contacted the largest shareholders, and the Election Committee now consists of:

• Lawyer Patrik Essehorn, appointed by Rutger Arnhult through companies
• Vincent Fokke, appointed by Stichting Pensioenfonds ABP
• Johan Strandberg, appointed by SEB Fonder
• Charlotte Strömberg, the Chairman of the Board

In total, the Election Committee represents approximately 16.3% of the total number of shares and votes in the company. The Election Committee will appoint a Chairman among its members.

The Election Committee's task for the Annual General Meeting 2019 is to propose a Chairman for the Annual General Meeting, the number of members of the Board of Directors, members of the Board of Directors and Chairman of the Board of Directors as well as auditors. The Election Committee will also propose remuneration to members of the Board of Directors and the auditors. Finally, the Election Committee will propose principles for appointing the Election Committee for the Annual General Meeting 2020.

Shareholders are welcome to submit their proposals and views to the Election Committee by December 3, 2018, at the latest, to Castellum AB, Att: Charlotte Strömberg, Box 2269, 403 14 Gothenburg, or by e-mail to charlotte.stromberg@castellum.se.

The Election Committee's proposals will be announced in the notice for the Annual General Meeting 2019 and on the company's website. The Annual General Meeting in Castellum AB will be held on March 21, 2019.

Gothenburg October 17, 2018

Henrik Saxborn CEO Castellum AB

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

This information is information that Castellum is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 08.00 a.m. CET on Wednesday October 17, 2018.

Events after the end of the period

No significant events occured after the end of the period.

The Castellum share

The Castellum share is listed on Nasdaq Stockholm Large Cap. At the end of the period the company had about 44,200 shareholders. The ten individual largest owner constellations confirmed as of September 30, 2018 are presented in the table below.

SHAREHOLDERS 09-30-2018

Shareholders	Number of shares, thousand	Percentage of voting rights and capital
Rutger Arnhult	15,500	5.7%
Stichting Pensioenfonds ABP	15,009	5.5%
SEB Fonder & Liv	14,158	5.2%
BlackRock	13,677	5.0%
Szombatfalvy-sphere	8,951	3.3%
Lannebo Fonder	8,901	3.2%
Vanguard	8,839	3.2%
PGGM Pensioenfonds	7,000	2.6%
Sjätte AP-fonden	6,701	2.4%
AMF Försäkring & Fonder	6,547	2.4%
Board and Executive Management Castellum	269	0.1%
Other shareholders registered in Sweden	65,246	23.9%
Shareholders registered abroad	102,403	37.5%
Total registered shares	273,201	100%

There is no potential common stock (eg. convertibles)

Source: Holdings by Modular Finance AB. Collected and analyzed data from Euroclear, Morningstar, Finansinspektionen, Nasdaq and Millistream.

The Castellum share price as of September 30, 2018 was SEK 159.10 (127.80) equivalent to a market capitalization of SEK 43.5 billion (34.9), calculated on the number of outstanding shares.

Since the beginning of the year a total of 227 million (214) shares were traded, equivalent to an average of 1,207,000 shares (1,140,000) per day, corresponding on an annual basis to a turnover rate of 110% (104%). The share turnover is based on statistics from Nasdaq Stockholm,Cboe CXE EU, Turquoise and Cboe BXE EU.

Net asset value

The net asset value is the aggregated capital that the company manages for its owners. From this capital, Castellum wants to generate return and growth at low risk.

The long term net asset value (EPRA NAV) can be calculated to SEK 168 per share (142). The share price at the end of the year was thus 95% (90%) of the long term net asset value.

Earnings

Income from property management adjusted for tax attributable to income from property management (EPRA EPS) amounted to SEK 9.52 (8.31) on rolling annual basis. This results in a share price yield of 6.0% (6.5%) corresponding to a multiple of 17 (15).

Income from property management must be adjusted by a longterm increase in the property value and effective tax paid.

Net income after tax amounted on rolling annual basis to SEK 27.46 per share (21.61), which from the share price gives a yield of 17.3% (16.9%), corresponding to a P/E of 5 (6).

Dividend yield

The recent AGM approved dividend of SEK 5.30 (5.00) corresponds to a yield of 3.3% (3.9%) based on the share price at the end of the period.

Total share yield

Over the last 12-month period the total yield on the Castellum share was 29% (3.6%), including a dividend.

Net asset yield including long-term change in value

In companies managing real assets, such as real estate, the income from property management only reflects part – albeit a large part – of the overall result. The definition of a real asset is that its value is protected. This means that over time – and with proper maintenance – the real asset increases in value to compensate for inflation.

The net asset value – i.e., the denominator of the yield ratio income/capital – is adjusted annually in accordance with IFRS regulations for changes in value. In order to provide an accurate figure of the yield, the numerator – i.e., income – must be similarly adjusted. Therefore, the recorded net income has to be supplemented with a component of value changes as well as with effective tax to provide an accurate view of income and yield.

One problem is that changes in value can vary greatly between years and quarters, thus leading to volatile results. However, by being a long-term player with stable cash flow and a balanced property portfolio, Castellum is able to make use of long-term value changes.

NET ASSET YIELD AND EARNINGS INCLUDING LONG-TERM CHANGE IN VALUE

		Sensitivity analysis
		-1%-unit	+1%-unit
Income from prop.mgmt rolling 12 months	2,793	2,793	2,793
Change in property value (on average 10 years)	2.1%	1.1%	3.1%
D:o MSEK	1,719	900	2,537
Current tax 7%	– 207	– 207	– 207
Earnings after tax	4,305	3,486	5,123
Earnings SEK/share	15.76	12.76	18.75
Return on actual long-term net asset value	19.1%	16.8%	21.4%
Earnings/share price	9.9%	8.0%	11.8%
P/E	10	12	8

Sept 30, 2018	Sept 30, 2017	Dec 31, 2017
2,025	1,716	2,291
7.41	6.28	8.39
45,772	38,800	41,834
168	142	153
41,809	34,833	37,632
153	127	138
7%	10%	9%
5.2%	5.4%	5.3%
5.3%	5.5%	5.4%

GROWTH, YIELD AND FINANCIAL RISK
	1 year	3 years aver- age/ year	10 years aver- age/ year
Growth
Rental income SEK/share	4%	5%	5%
Income from property mgmt SEK/share	10%	8%	7%
Net income for the year after tax SEK/share	27%	22%	27%
Dividend SEK/share	6%	10%	7%
Long term net asset value SEK/share	18%	14%	9%
Actual net asset value SEK/share	20%	15%	8%
Property portfolio SEK/share	13%	13%	8%
Change in property value	7%	5%	2%
Yield
Return on actual long term net asset value	22.1%	19.7%	12.3%
Return on actual net asset value	24.7%	19.3%	11.7%
Return on total capital	11.2%	9.8%	6.9%
Total yield of the share (incl. dividend)
Castellum	29.0%	20.2%	16.0%
Nasdaq Stockholm (SIX Return)	8.3%	12.4%	13.5%
Real Estate Index Sweden (EPRA)	21.6%	17.8%	19.1%
Real Estate Index Europe (EPRA)	7.1%	4.0%	8.3%
Real Estate Index Eurozone (EPRA)	8.7%	9.4%	9.7%
Real Estate Index Great Britain (EPRA)	3.8%	–0.9%	4.7%
Financial risk
Loan to value ratio	46%	49%	50%
Interest coverage ratio	426%	388%	327%

THE SHARE'S DIVIDEND YIELD

SHARE PRICE/NET ASSET VALUE

YIELD EARNINGS PER SHARE

Definitions

KEY SHARE RELATED METRICS

Data per share

In calculating income and cash flow per share the average number of shares has been used, whereas in calculating assets, shareholders' equity and net asset value per share the number of outstanding shares has been used. The number of historical shares that have been recalculated with reference to the bonusissue element (i.e. the value of the subscription right) in the completed new share issue.

Dividend pay out ratio

Dividend as a percentage of income from property management.

Dividend yield

Proposed dividend as a percentage of the share price at the end of the period.

EPRA EPS - Earnings Per Share

Income from property management adjusted for nominal tax attributable to income from property management, divided with the average number of shares. With taxable income from property management means income from property management with a deduction for tax purposes of depreciation and reconstruction.

EPRA NAV - Long term net asset value

Reported equity according to the balance sheet, adjusted for interest rate derivatives and deferred tax.

EPRA NNNAV - Actual net asset value

Reported equity according to the balance sheet, adjusted for actual deferred tax instead of nominal deferred tax.

Number of shares

Registered number of shares - the number of shares registered at a given point in time. Outstanding number of shares - the number of shares registered with a deduction for the company's own repurchased shares at a given point in time.

Total yield per share

Share price development with addition of the dividends during the period which was reinvested in shares that day shares traded ex-dividend.

KEY PROPERTY RELATED METICS

Economic occupancy rate

Rental income accounted for during the period as a percentage of rental value for properties owned at the end of the period. Properties acquired/completed during the period have been restated as if they had been owned or completed during the whole year, while properties disposed of have been excluded entirely. Development projects and undeveloped land have been excluded.

Income from property management

Net income for accounted for after reversal of transaction and restructuring costs, revaluation of results due to stepwise acquisition, changes in value and tax, both for the Group and for joint venture.

Net operating income

Net operating income as a percentage of rental income.

Operating expenses

This item includes both direct property costs, such as operating expenses, maintenance, ground rent and real estate tax, as well as indirect costs for leasing and property administration.

Property type

The property's primary rental value with regard to the type of premises. Premises for purposes other than the primary use may therefore be found within a property type. Castellum's property types are: office, retail, warehouse/logistics, light industry, public sector properties (customers that are directly or indirectly tax funded) and developments and undeveloped land.

Rental income

Rents debited plus supplements such as reimbursement of heating costs and real estate tax.

Rental value

Rental income plus estimated market rent for vacant premises.

SEK per square metre

Property-related key ratios, expressed in terms of SEK per square metre, are based on properties owned at the end of the period. Properties acquired/completed during the year have been restated as if they had been owned or completed for the whole year, while properties disposed of have been excluded entirely. Development projects and undeveloped land have been excluded. In the interim accounts key ratios have been recalculated on an annual basis, disregarding seasonal variations normally occurring in operations.

KEY FINANCIAL METRICS

Interest coverage ratio

Income from property management after reversal of net financial items and income from property management in joint venture as a percentage of net interest items.

Loan to value ratio

Interest-bearing liabilities after deduction for liquid assets as a percentage of of the properties' fair value with deduction for acquired properties not taken in possession, and with addition for properties disposed of, still in possession, at the year-end.

Return on actual net asset value

Income after tax as a percentage of initial net asset value during the year, but with actual deferred tax instead of nominal tax. In the interim accounts the return has been recalculated on an annual basis, disregarding seasonal variations normally occurring in operations.

Return on long term net asset value

Income after tax with reversed changes in value of derivatives and deferred tax as a percentage of initial long term net asset value. In the interim reports the return has been recalculated on annual basis, disregarding seasonal variations normally occuring in operations.

Return on equity

Income after tax as a percentage of average equity. In the interim accounts the return has been recalculated on an annual basis, disregarding seasonal variations normally occurring in operations.

Return on total capital

Income before tax with reversed net financial items and changes in value on derivatives during the year as a percentage of average total capital. In the interim accounts the return has been recalculated on an annual basis, disregarding seasonal variations normally occurring in operations.

Financial calendar

Year-end Report 2018 23-Jan-19 Annual General Meeting 2019 21-March-19 Interim Report Jan-March 2019 24-April-19 Half-year Report Jan-June 2019 12-July-19 Interim Report Jan-Sept 2019 18-Oct-19

www.castellum.com

Visit Castellum's website to download and/or subscribe to Castellum's Pressreleases and Financial Reports. For further information please contact Henrik Saxborn, CEO, phone +46 31 60 74 50 or Ulrika Danielsson, CFO, phone +46 706 47 12 61.

About Castellum

Castellum is one of the largest listed real estate companies in Sweden. Property values amount to SEK 87.5 billion and holdings comprise office, warehousing/logistics and public sector properties, covering a total leasable area of 4.4 million square metres.The real estate portfolio is owned and managed under the Castellum brand through a decentralized organization with strong and clear local presence in 20 cities in Sweden and also in Copenhagen and Helsinki.

In 2018, Castellum received two awards for sustainability efforts; designated Number One in the world by GRESB for the offices-and-logistics sector, as well as the Level Gold award for sustainability reporting from the EPRA (European Public Real Estate Association). In addition, Castellum is the only Nordic real-estate and construction company elected to the Dow Jones Sustainability Index (DJSI), joining a select group of companies in the world who perform best on sustainability issues.

The Castellum share is listed on Nasdaq Stockholm Large Cap.

Castellum AB (publ) • Box 2269, 403 14 Gothenburg • Visiting address: Östra Hamngatan 16 Phone: +46-31-60 74 00 • E-post: info@castellum.se • www.castellum.com Domicile: Gothenburg • Corp.id.no: 556475-5550