Castellum — Interim / Quarterly Report 2019

Jul 12, 2019

HALF-YEAR REPORT JANUARY – JUNE 2019

I

Q2

Continued strong rental growth promotes 9% increase in income from property management

• Income for the period January-June 2019 amounted to MSEK 2,871 (MSEK 2,740 previous year).
• Income from property management amounted to MSEK 1,543 (1,420), corresponding to SEK 5.65 (5.20) per share, an increase of 9%.
• Changes in value on properties amounted to MSEK 1,882 (827) and on derivatives to MSEK - 297 (25).
• Net income after tax for the period amounted to MSEK 2,586 (2,425), corresponding to SEK 9.47 (8.88) per share.
• Long term net asset value amounted to SEK 184 (159) per share. An increase of 16%.
• Net lease for the period was MSEK 4 (128).
• Net investments amounted to MSEK 186 (2,069) of which MSEK 2,770 (1,019) were acquisitions, MSEK 1,473 (1,437) new constructions, extensions and reconstructions and MSEK 4,057 (387) sales. Property value by the end of the period amounted to SEK 91.4 billion.

Important events during the quarter

In June 2019, Castellum received an upgraded investment grade to "Baa2" stable outlook from Moody's, the international credit rating institute.

In early April 2019, it was announced that Castellum would be coming in as a partner with HSB Bostad for a project covering two blocks in Hagastaden district of Stockholm, in which Castellum will build, own and manage commercial space totalling approximately 10,000 square meters. The estimated total investment in this phase is approximately MSEK 550, of which the acquisition of development rights is estimated to total approximately MSEK 200. The planned construction start is 2022, with occupancy scheduled for 2024 at the earliest. Castellum has previously announced land allocation agreement in Hagastaden for the Sorbonne block for office and the Harvard and Greifswald blocks for residences. Altogether, the building rights cover new construction of approx. 23,000 sq.m. offices.

In April, together with other real estate companies and the Swedish Property Federation, Castellum formed Accessy. The focus of this initiative is to create an independent operator for developing digital keys. The ambition of the company is to bring more players on board so that the solution can break through on a broad front.

Castellum has also participated in the creation of an European innovation lab (the pan-European REIT innovation and CSR think tank).

KEY METRICS	2019 April-June	2018 April-June	2019 Jan-June	2018 Jan-June	2018 Jan-Dec
Income, MSEK	1,438	1,388	2,871	2,740	5,577
Net operating income, MSEK	1,067	1,002	2,044	1,940	3,945
Income of property management, MSEK	817	755	1,543	1,420	2,952
D:o SEK/share	2.99	2.76	5.65	5.20	10.81
D:o growth	+8%	+15%	+9%	+14%	+17%
Net income after tax, MSEK	1,245	1,660	2,586	2,425	7,453
Net investments, MSEK	912	1,567	186	2,069	2,657
Net leasing, MSEK	11	80	4	128	161
Loan-to-value ratio	44%	47%	44%	47%	45%
Interest coverage ratio	504%	461%	485%	426%	454%
Long term net asset value (EPRA NAV) SEK/share	184	159	184	159	176
Actual net asset value (EPRA NNNAV) SEK/share	170	145	170	145	162

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: Interior from the newly inaugurated United Spaces Arlanda. The unit offers a full service coworking concept located in connection to Arlanda Airport, Stockholm. Photo by Tommy Gärdh.

Positive signals

At the start of the year, I believed there were possible indications of a slowdown in the rental market, which was noted in the previous interim report. I am more optimistic today than I was back in January.

We are noting many positive signals at the moment:

Rental levels are rising. When Castellum established operations in the city of Stockholm through the acquisition of Norrporten, the rental levels at Castellum's central properties in Stockholm were around SEK 4,500 per square meter. Today, in the corresponding buildings we have more than SEK 6,000 per square meter with top rental levels around of SEK 7,500 per square meter. We have noted the same trend in Gothenburg. The intensive renegotiations should generate a positive addition to rental income over the index increase of about 2%. Accordingly, the assessment is that this year, we can also come close to last year's record increase in rental income for like-for-like properties. Net leasing is rising again. Following the negative first quarter, net leasing in the second quarter increased MSEK 17 to MSEK +11.

Development plans approved. We have received approvals for development plans for three of our largest projects; E.ON's head office, the new Swedish National Courts Administration building in Malmö and the Kungspassagen building in Uppsala. These projects entail a total investment approaching MSEK 3,000 with production starting in the next six months. The occupancy rate is 100% for the two largest projects, E.ON and the Swedish National Courts Administration, which means that these two projects is estimated to boost net leasing by MSEK 146 already this year.

Larger weighting toward projects. In the current market, projects have a considerably higher yield than acquisitions, and now account for the lion's share of Castellum's investments. We have prepared for the future through the acquisition of Säve airport, which represents a substantial increase in our land bank. At Säve alone, we have identified an investment need of at least MSEK 8,000, primarily in logistics, during the first phase. In addition to its optimal logistics location, Säve is interesting because we have already created a technology hub for electrified mobility. This includes tenants such as Heart Aerospace (electric aircraft), CEVT (vehicles), Everdrone (drones) and the Swedish Maritime Administration expands their helicopter operations in the area.

Upgraded credit rating

The quarter has also brought positive news in other areas. At the beginning of June, Moody's announced that they upgraded Castellum's credit rating to "Baa2" with a stable outlook. This opens favorable possibilities in the Eurobond market and to gain access to a larger market on competitive terms and with longer tenors than those available in the Swedish credit market.

Castellum has also become a member of an European innovation lab (the pan-European REIT innovation and CSR think tank), where together with strong European property companies, such as Gecina in France and Great Portland Estates in the UK, we will more cost-efficiently be able to develop sustainability and technical solutions to provide more effective control of properties and new types of service offerings for our customers.

Continued healthy growth

As informed previously, the sale of our substantial holdings in Sundsvall (which were transferred in March) has put a cap on growth in the second quarter. Despite this, income from property management increased 8%, to SEK 2.99 per share in the second quarter. For the first six months, this means an increase of 9%, to SEK 5.65 per share. It also demonstrates that without net sales, we can achieve our growth goal of 10%.

In this context, it is worthy of note that our co-working initiative, United Spaces, is developing in the right direction.

Stockholm Waterfront has been expanded and is fully occupied, Malmö and Gothenburg are progressing well, and the recently opened unit at Arlanda is in its start-up phase. In terms of performance, United Spaces will not have a negative impact on net income for the year, which strengthens our belief that this acquisition entails a significant gain in tempo and a rapid acquisition of skills in a new area for Castellum.

Property values also trended favorably. The total increase in value over the quarter amounted to MSEK 1,193. Altogether, this means that the loan-to-value ratio was brought down another notch to 44%.

Accordingly, EPRA NAV amounted to SEK 184 per share (159), a 16% increase.

In summary, a good quarter with positive undertones looking forward. I believe that this year as well – disregarding any changes in the portfolio – we will succeed in achieving growth fairly closely aligned to our long-term goal.

Gothenburg July 12, 2019

Henrik Saxborn

CEO, Castellum

Market comments

EMINENT, THE NORDIC REGION'S FIRST WELL-REGISTERED OFFICE, INAUGURATED

In June, Castellum inaugurated Eminent, its new production in the Hyllie district outside of Malmö. Eminent is the Nordic region's first WELL-registered office building, and the property is fully leased. The WELL Building Standard® (WELL) is the first international construction standard that takes into consideration people's well-being in their working lives. Eminent's approximately 10,000 square meters are divided into seven floors, and the property houses a bistro, a gym, shared conference facilities and co-working spaces. Eminent also has a shared roof terrace with green spaces for the bistro and outdoor work areas. The property is also Miljöbyggnad Gold level certified. Read more about Eminent and WELL at www.castellum.com.

"Interest in Eminent has been incredibly strong. It is gratifying to see more employers understanding the value of investing in their employees' well-being. The benefits are many, such as fewer instances of sick leave and stress-related illnesses. Healthy, happy employees perform better, thereby increasing the company's profitability."

Henrik Saxborn, CEO Castellum

Swedish, Danish and Finnish economy

The Swedish economy performed relatively well in 2018 and posted preliminary GDP growth of 2.4%, however for 2019, the growth rate is expected to decline somewhat to around 1.8% before reaching a low point in 2020 of 1.6% before rising again to 1.8% in 2021 (Sweden's Riksbank [Sweden's Central bank], July 2019). Household optimism has dampened somewhat. This, together with lower housing investments, is reducing the rate of growth, even if investments in infrastructure can counteract the effect somewhat. Demand for exports is also expected to slacken in light of factors including geopolitical unrest. The longterm effects are difficult to foresee.

The Swedish labor market has been positively impacted, and unemployment is at its lowest level since 2008. The level of unemployment is expected to stabilize in 2019 and increase somewhat during 2020–2021, in light of an increase in the supply of labor and problems in matching workers to jobs. Inflation (CPIF) shows signs of increasing and is now around the Riksbanken's target level of +2%, where the Riksbanken expects it to remain for the next few years. Development of the Swedish krona exchange rate plays a key role for inflation in Sweden, as a weak exchange rate normally contributes to higher inflation. The Swedish krona weakened (TCW index) relatively drastically during 2018, and has during early 2019 remained weak at a level last noted in early 2009.

MACRO INDICATORS - SWEDEN

Unemployment	6.3%	(May 2019)
Inflation	2.1%	(May 2019 compared to May 2018)
GDP-growth	0.6%	(Q1 2019 compared to Q4 2018)

Source: SCB

Danish GDP growth is expected to remain relatively stable around 1.7% annually over the next few years, after it increased by 1.2% in 2018 according to Danmarks Nationalbank (March 2019). It is mainly private consumption in light of rising employment that is expected to boost GDP, but favourable export prospects and investments will also contribute. Inflation in Denmark — expressed in terms of HICP — is expected to be around 1.2% in 2019 to then rise to approximately 1.5% in 2020.

In Finland, the expected GDP growth rate is around 1.6% in 2019 and 1.2% for 2020, which is weaker than 2018 when GDP grew approximately 2.4% according to the Finnish Ministry of Finance (June 2019). Growth is somewhat subdued primarily for consumption and investments. Inflation (CPI) is expected to increase marginally from around 1.1% in 2018 to around 1.2% in 2019 and 1.5% in 2020.

Rental market

In Castellum's submarkets in Sweden, the rental market for office space has remained positive in 2019. The demand for office premises is robust and the supply is limited. The average rent in the CBDs of Stockholm, Gothenburg and Malmö has according to Newsec increased by 8%, 4% and 2% compared with Q2 2018.

Rising rental levels have been noted in all submarkets in Stockholm and Gothenburg as a result of continued record low vacancy rates in the CBDs and the most attractive submarkets. Top rental levels of approx. SEK 9,000 per square meter and SEK 4,000 per square meter have been noted in Stockholm and Gothenburg respectively. In regional cities, the growth in office rents in 2019 continued generally to increase. Increased demand was noted in the rental market for office space intended for co-working, above all in Stockholm, but increased interest was also noted in Gothenburg and Malmö.

Office rents in the CBDs of Copenhagen and Helsinki have continued to trend positively in 2019, driven by growth in the economies, declining vacancy rates and relatively low new production. However, the high level of access to land and development rights in and around Copenhagen, is a limiting factor for rent potential.

The rental market in Sweden for warehouses/logistics spaces is positive, with rising rents in prime logistics locations, particularly in semi-central locations with good means of transportation and sorting yards, i.e., last-mile locations. This is driven by strong demand, based mainly on the growth in e-commerce (PostNord/HUI forecast growth of 14% in 2019). Rental levels are relatively stable for the largest logistics rental properties (> 10,000 square meters).

Real estate market

The volume for transactions over MSEK 40 in the transaction market in Sweden is estimated at around SEK 85 billion distributed over 218 transactions during first six months of 2019 (Q1–Q2 2018 approximately SEK 58 billion over 217 transactions; Q1–Q2 2017: approximately SEK 82 billion over 284 transactions). The proportion of foreign investors was approximately 29% (Q1–Q2 2018: 28%). All together, it can be stated that there was almost the same amount of transactions as last year but a greater transaction volume.

Office properties in the CBDs of Stockholm, Gothenburg, Uppsala and Malmö remain in great demand in the investor market, which led to required investment yields continuing to decline in the transactions being conducted. Declining required investment yields have also been noted in the most attractive submarkets in these cities. Properties with secure cash flows such as public sector properties, and compound property portfolios that generate healthy cash flows, are attractive to investors once again a consequent decrease in required yields. In Castellum's submarkets outside the metropolitan areas, the required yield for office properties was stable in the first half year of 2019.

Warehouse and logistics properties attract a growing number of both domestic and international investors, driven largely by the growth of e-commerce. The required investment yield for completed transactions in the market has set record lows, since demand in the investor market is high and rising, which is driving prices up. In H1 2019, three major transactions in the logistics area with a combined volume of around SEK 12 billion were completed in the Swedish market. The required yield in Castellum's logistics strongholds were thus further adjusted down in Q2 2019.

In Denmark, the transaction volume in the Danish property market totalled DKK 27 billion in Q1–Q2 2019 (Q1–Q2 2018: approximately DKK 43 billion).

In Finland, the transaction volume in the Finnish property market totalled approximately EUR 3.7 billion in Q1–Q2 2019 (Q1–Q2 2018: EUR 4.1 billion). The transaction market was extremely active in June with a volume of about EUR 1.4 billion (up around 50% on June 2018). Competition for attractive properties has increased, and many investors who previously were interested only in properties with secure cash flows are now also beginning to show interest in assets that can be developed with a little greater risk. The increased competition is leading to a continued fall in required investment yields in CBDs and neighbouring submarkets.

Interest and Credit market

In December 2018, Sweden's Riksbank raised interest rates from -0.5% to -0.25%, the first increase in seven years. The Riksbank repo-rate path (July 2019) indicates that the next increase will take place by the end of 2019/beginning of 2020.

Swedish long-term interest rates have fallen substantially to date this year and, for example, the ten-year swap rate posted a new all-time-low of about +0.5% in mid-June. On the other hand, STIBOR 3 months remained relatively stable at around zero during the second quarter. All in all, the yield curve continued to become shallower. At the end of the quarter, the fiveyear swap rate — of particular importance to Castellum was approximately 0.1%, which is a decrease of approximately 0.4% compared with the end of 2018.

The availability of financing in the Swedish capital market improved during the first half-year after a significant downturn in the fourth quarter of 2018. In June, Castellum's credit rating was upgraded by Moody's. The new rating is Baa2 with a stable outlook.

To date this year, MSEK 2,300 has been issued in SEK MTNs with tenors of between two and ten years. A NOK issue was carried out under the EMTN program with a tenor of ten years and a volume corresponding to slightly more than MSEK 938. The volume of commercial paper outstanding was just under MSEK 5,000 as per the closing balance for June. The credit margins, which rose drastically in the fourth quarter of 2018, fell considerably in the spring but have risen slightly again by the end of June. However, levels remain substantially lower now than at the start of the year.

In Denmark, management of the CIBOR 3 months interest rate in Q1–Q2 2019 was relatively stable, around -0.3%, which also applied to Finland/Euribor 3m.

Condensed consolidated statement of comprehensive Income

MSEK		2019 April-June	2018 April-June	2019 Jan-June	2018 Jan-June	Rolling 4 quarters July 18-June 19	2018 Jan-Dec
Rental income		1,296	1,290	2,605	2,557	5,233	5,185
Service income		112	98	223	183	432	392
Income coworking		30	–	43	–	43	–
Income	note 2	1,438	1,388	2,871	2,740	5,708	5,577
Operating expenses	note 3	– 147	– 157	– 372	– 380	– 745	– 753
Maintenance	note 3	– 33	– 48	– 73	– 76	– 164	– 167
Ground rent		–	– 6	–	– 13	– 10	– 23
Property tax	note 3	– 74	– 77	– 151	– 153	– 313	– 315
Coworking expenses	note 3	– 30	–	– 42	–	– 42	–
Leasing and property administration	note 3	– 87	– 98	– 189	– 178	– 385	– 374
Net operating income		1,067	1,002	2,044	1,940	4,049	3,945
Central administrative expenses	note 3	– 42	– 38	– 90	– 84	– 164	– 158
Acquisition cost		– 9		– 9		– 9
Net financial items	note 4
Net interest costs		– 202	– 209	– 401	– 436	– 800	– 835
Leasing cost/Ground rent		– 6	–	– 10	–	– 10	–
Income from property management including acquisition costs*	note 1	808	755	1,534	1,420	3,066	2,952
Income from property management		817	755	1,543	1,420	3,075	2,952
Goodwill, depreciation		–	–	– 179	–	– 179	–
Changes in value	note 8
Properties	note 5	1,193	596	1,882	827	6,271	5,216
Derivatives		– 176	32	– 297	25	– 170	152
Income before tax		1,825	1,383	2,940	2,272	8,988	8,320
Current tax	note 6	- 74	– 1	– 107	– 3	– 178	– 74
Deferred tax	note 6	– 506	278	- 247	156	– 1,196	– 793
Net income for the period/year		1,245	1,660	2,586	2,425	7,614	7,453
Other total net income
Items that can be reclassified into net income
Translation difference of currencies		113	226	156	315	– 8	151
Change in value derivatives, currency hedge		- 88	– 92	- 97	– 181	- 59	– 143
Total net income for the period/year**		1,270	1,794	2,645	2,559	7,547	7,461
Average number of shares, thousand		273,201	273,201	273,201	273,201	273,201	273,201

* For calculation, Financial Key ratios, page 19.

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

Accounting principles can be found on page 20.

Comparisons, shown in brackets, 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, January-June 2019

NOTE 1 Income from property management

Income from property management, i.e. net income excluding transaction and restructuring costs, changes in value and tax amounted for the period January-June 2019 to MSEK 1,543 (1,420), equivalent to SEK 5.65 (5.20) per share – an increase with 9%. Income from the property management rolling four quarters amounted to MSEK 3,075 (2,702) equivalent to SEK 11.26/share (9.89) – an increase of 14%.

SEGMENT INFORMATION

	Income		Income from prop.mgmt
MSEK	2019 Jan-June	2018 Jan-June	2019 Jan-June	2018 Jan-June
Central	724	716	390	376
West	646	606	372	322
Öresund	579	549	331	281
Stockholm-North	852	869	510	469
Finland	27	–	19	–
Coworking	43	–	– 2	–
Total	2,871	2,740	1,620	1,448

The difference between the income from property management of MSEK 1,620 (1,448) above and the Group's accounted income before tax of MSEK 2,940 (2,272) consists of unallocated income from property management of MSEK - 86 (–28), write-down goodwill of MSEK -179 (-), changes in property value of MSEK 1,882 (827) and changes in values of derivatives of MSEK -297 (25).

NOTE 2 Income

The Group's income amounted to MSEK 2,871 (2,740) and the average occupancy rate was 93.1% (93.0%) including discounts of MSEK 48 (43). This also includes a lump sum of MSEK 3 (11) as a result of early termination of leases. Moreover, Castellum acquired the coworking company United Spaces in 2019, which brought income of MSEK 43.

INCOME FROM PROPERTY MANAGEMENT PER SHARE NET LEASING

DEVELOPMENT OF INCOME
MSEK	2019 Jan-June	2018 Jan-June	Change, %
Like-for-like holdings	2,440	2,330	4.7%
Development properties	193	141	-
Transaction	195	269	-
Coworking	43	–	-
Income	2,871	2,740	4.8%

The increase like-for-like of 4.7% can be referred to higher rental levels. Gross leasing (i.e. the annual value of total leasing) during the period was MSEK 170 (232), of which MSEK 19 (70) were leasing of new constructions, extensions and reconstructions. Notices of termination amounted to MSEK 166 (104), of which bankruptcies were MSEK 4 (6) and MSEK 3 (8) were notices of termination with more than 18 months remaining length of contract. Net lease for the period was MSEK 4 (128). 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

			Region
MSEK	Central	West	Öresund	Sthlm	North	Total
NEW LEASES
Existing properties	39	23	35	52	2	151
Investments	1	0	14	4	0	19
Total	40	23	49	56	2	170
NOTICES OF TERMINATIONS
Existing properties	- 38	- 30	- 41	- 52	- 1	- 162
Bankruptcies	- 1	0	0	- 3	0	- 4
Total	- 39	- 30	- 41	- 55	- 1	- 166
Net leasing	1	- 7	8	1	1	4
D:o Q2 2018	47	34	6	32	9	128

NOTE 3 Costs

Direct property costs totalled MSEK 596 (622), corresponding to SEK 282/sq. m. (285). In addition, expenses for coworking totalled MSEK 42.

An assessment for taxes on real property has taken place in Sweden, which could result in higher assessed values with higher property tax as a result. Castellum will account for changes in its property tax only when the final statement is received, which is expected in the third quarter. A large part of the property tax will be charged onward to the customer, however, with higher rental income as a result. The effect on earnings will thus be extremely limited.

Property admin amounted to MSEK 189 (178), corresponding to SEK 94 per sq.m. (83). Central admin amounted to MSEK 90 (84). Included in the central administrative expenses are also costs related to the profit-and-shareprice related incentive plan for members of the Executive Management of MSEK 1 (9). Acquisition costs of MSEK 9 were attributable to the purchase of United Spaces.

DEVELOPMENT OF PROPERTY COSTS

MSEK	2019 Jan-June	2018 Jan-June	Change,%
Like-for-like holdings	508	505	0.6%
Transfer of site leaseholds	–	13	–
Development properties	34	32	–
Transaction	54	72	–
Direct property costs	596	622	–4.2%
Coworking	42	–	–
Property admin	189	178	–
Central admin	90	84	–
Total costs	917	884	3.7%

Consumption for heating during the period has been calculated to 87% (94%) of a normal year according to the degree day statistics.

PROPERTY COSTS
	Office	Public sector properties	Ware house/ Logistics	Light industry	Retail	Total
Operating expenses	221	195	112	117	172	175
Maintenance	47	35	20	23	32	35
Real estate tax	113	85	23	21	58	72
Total prop. costs	381	315	155	161	262	282
Leasing & prop. admin						94
Total	381	315	155	161	262	376
D:o Q2, 2018	379	312	177	168	254	368

NOTE 4 Net interest

Net interest items were MSEK – 401 (–436). The average interest rate level was 2.1% (2.3%). Net interest income was positively affected by approx. MSEK 47 due to the 0.2 percentage point decline in the average interest rate level. Moreover, costs for site leasehold fees and to some extent leases will be recognised as financial expenses from 2019. In the first six months of the year, these costs totalled MSEK 10.

NOTE 5 Changes in value

The property market remained steady through the first six months of 2019 with stable prices as a result. There is particular interest for logistics facilities, centrally located office properties in large cities and properties with secure cash flows. This, together with a healthy rental market and project gains, means that Castellum recognized an unrealized change in value of MSEK 2,199, corresponding to a 2.5% increase in value for the first six months. Additionally, a realized decrease in value of MSEK 317 was recognized, attributable to the sale of 27 properties for MSEK 4,057 less overhead costs and deferred tax totaling MSEK 170. The underlying property price, which accordingly amounted to MSEK 4,227, was therefore MSEK 147 below the valuation. Since the sale was conducted as a business transaction, it is also recognized as deferred tax income of approximately MSEK 400. The sales meant that Castellum left Sundsvall and Vaggeryd outside Jönköping. Castellum has also divested a portfolio of retail properties in Uppsala. 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 - 297 (25) mainly due to changes in long-term market interest rates.

CHANGE IN VALUE PROPERTIES

MSEK	2019 Jan-June	2018 Jan-June
Cash flow	359	192
Project gains/building rights	294	219
Required yield	1,353	350
Acquisitions	193	8
Sales	– 317	58
Total	1,882	827
D:o %	2.1%	0.9%

NOTE 6 Tax

Recognized tax totalled MSEK - 354 (153), of which MSEK - 107 (- 3) is tax paid. Current tax is calculated based on a nominal tax rate of 21.4%, while deferred tax is based on the lower tax rate, 20.6% that applies from 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. Tax paid arises as a result of there being existing tax loss carry forwards in the former Norrporten Group, and can thus not be utilized in Castellum as a whole.

Remaining tax loss carryforwards can be calculated to MSEK 1,076 (1,832). Furthermore, there are untaxed reserves at and undervalue of MSEK 149 (144).

Fair values for the properties exceed their fiscal value by MSEK 52,891 (46,196) of which MSEK 6,176 (4,423) 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 9,433 (8,257).

Castellum has no current tax disputes.

Contin. Note 6

TAX CALCULATION 06-30-2019

MSEK	Underlag aktuell skatt	Underlag uppskjuten skatt
Income from property management	1,543
Non-deductible interest	81
Deductions for tax purposes
depreciations	– 532	532
reconstructions	- 213	213
Other tax allowances	– 4	- 108
Taxable income from property mgmt	875	637
Current income tax 21.4%, if tax losses are not utilized	– 187
Properties sold	–	- 2,012
Changes in value on properties	–	2,199
Taxable income before tax loss carry forwards	875	824
Tax loss carry forwards, opening balance	– 1,081	1,081
Previously uncapitalized tax loss carry forwards	– 370	370
Tax loss carry forwards, closing balance	1,076	– 1,076
Taxable income	500	1 ,199
Tax according to Income statement for the period	- 107	– 247

NET DEFERRED TAX LIABILITY 06-30-2019
MSEK	Basis	Nominal tax liability	Real tax liability
Tax loss carry forwards	1,076	230	220
Untaxed reserves	- 149	-32	- 32
Properties	- 52,891	-10,903	-3,126
Total	- 51,964	-10,705	- 2,938
Properties, asset acq.	6,176	1,272
In the balance sheet	- 45,788	-9,433

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 calculated to 6% 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 20%, and that the properties are realized in over 50 years where 33% are sold directly with a nominal tax of 20.6% and that 67% are sold indirectly through company disposals where the buyers tax discount is 7%. This provides a present value for deferred tax liability of 6%.

CASTELLUM A PARTNER IN ACCESSY, WITH A FOCUS ON DIGITAL ACCESS TO PROPERTIES

In April, together with other real estate companies and the Swedish Property Federation, Castellum formed Accessy. The focus of this initiative is to create an independent operator for developing digital keys. One part of the new reality for property owners concerns managing the flood of deliveries into properties while tenants today want more services linked to their workplaces — for example, access to workplaces in co-working environments, renting a conference room for a meeting, having a meeting catered or renting an electric bicycle. Today there is no platform in which property owners can easily tie this customer journey together, which is the reason for Accessy, the shared digital platform. The ambition is to bring more players on board so that the solution can break through on a broad front.

"This new platform for digital keys we want to build could be interpreted as the equivalent of Swish, the mobile phone-based payment service. Digital keys will make life easer both for our customers and ourselves as property owners. It also provides good conditions for creating new smart phone services for our customers."

Niclas Ingeström, Chief Digital Officer, Castellum

Condensed consolidated Balance Sheet

MSEK		June 30, 2019	June 30, 2018	Dec 31, 2018
ASSETS
Investment properties	note 7	91,427	84,298	89,168
Goodwill	note 8	1,691	1,659	1,659
Leases, value in use	note 9	868	-	-
Other fixed assets		198	121	146
Current receivables		1,056	746	924
Liquid assets		157	84	243
Total assets		95,397	86,908	92,140
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity		40,727	34,847	39,749
Deferred tax liability	note 6	9,433	8,257	9,203
Other provisions		6	3	6
Interest-bearing liabilities	note 10	40,242	39,992	40,358
Derivatives	note 11	701	1,323	716
Lease agreement	note 9	868	–	–
Non interest-bearing liabilities		3,420	2,486	2,108
Total shareholders' equity and liabilities		95,397	86,908	92,140
Pledged assets (property mortgages)		20,923	28,717	21,803
Pledged assets (chattel mortgages)		–	–	–
Contingent liability		–	–	–

Condensed Changes in Equity

MSEK	Number of outstanding shares, thousand	Share capital	Other capital contribution	Currency translation reserve	Currency hedge reserve	Non controlling interest	Retained earnings	Total equity
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-June 2018	–	–	–	–	–	–	2,425	2,425
Other total net income Jan-June 2018	–	–	–	315	– 181	–	–	134
Shareholders' equity 06-30-2018	273,201	137	12,434	438	– 307	– 2	22,147	34,847
Net income July-Dec 2018	-	-	-	-	-	-	5,028	5,028
Other total net income July-Dec 2018	-	-	-	- 164	38	-	-	- 126
Shareholders' equity 12-31-2018	273,201	137	12,434	274	– 269	– 2	27,175	39,749
Dividend March and Sept 2019 (6.10 SEK/share)	–	–	–	–	–	–	– 1,667	– 1,667
Net income Jan-June 2019	-	-	-	-	-	-	2,586	2,586
Other total net income Jan-June 2019	-	-	-	156	- 97	-	-	59
Shareholders' equity 06-30-2019	273,201	137	12,434	430	- 366	- 2	28,094	40,727

Balance sheet, June 30, 2019

NOTE 7 Real estate portfolio and property value

Investment properties

The real estate portfolio is located in growth areas in Sweden, Copenhagen and Helsinki. The commercial portfolio consists of 47% office, 23% public sector properties, 16% warehouse/logistics, 7% retail and 2% light industry. The properties are located from inner city sites to well-situated working-areas with good means of communication and services. The remaining 5% consist of projects and undeveloped land.

Castellum owns approx. 702,000 sq.m. of unutilized building rights and furthermore ongoing projects with remaining investments of approx. MSEK 1,200.

Investments

During the period, investments totalling MSEK 4,243 (2,456) were carried out, of which MSEK 2,770 (1,019) were acquisitions and MSEK 1,473 (1,437) new constructions, extensions and reconstructions. After sales of MSEK 4,057 (387) net investments amounted to MSEK 186 (2,069).

CHANGES IN THE REAL ESTATE PORTFOLIO
	Value, MSEK	Number
Real estate portfolio on January 1, 2019	89,168	647
+ Acquisitions	2,770	11
+ New constructions, extensions and reconstructions	1,473	-
- Sales	- 4,374	- 27
+/- Unrealized changes in value	2,199	-
+/- Currency translation	191	-
Real estate portfolio on June 30, 2019	91,427	631

Property value

Internal valuations

Castellum assesses the value of the properties through internal valuations, as of previous year, corresponding to level 3 in IFRS 13. The valuations are based on a 10-year cash flow based model with an individual valuation for each

property of both its future earnings capacity and the required market yield. In the valuation of 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 1,500 (1,480) 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 were assessed to MSEK 91,427 (89,168), corresponding to SEK 21,967 per sq.m. (20,417).

Average valuation yield

The average valuation yield for Castellum's real estate portfolio, excluding development projects and undeveloped land, can be calculated to 5.1% (5.3%).

AVERAGE VALUATION YIELD
(excl. project/land and building rights )	MSEK
Net operating income properties	2,211
+ Real occupancy rate, 94% at the lowest	98
- Property admin, SEK 30/sq.m.	- 74
Normalized net operating income (6 months)	2,235
Valuation (excl. building rights of MSEK 473)	86,883
Average valuation yield	5.1%
VALUATION YIELD PER CATEGORY
	June 30,2019	Dec 31, 2018
Office	5.0%	5.1%
Public sector properties	4.8%	5.0%
Warehouse/logistics	5.6%	5.8%
Retail	5.7%	5.9%
Light industry	6.9%	6.9%
Total	5.1%	5.3%
PROPERTY RELATED KEY RATIOS

	2019 Jan June	2018 Jan June	2018 Jan Dec
Rental value, SEK/sq.m.	1,481	1,377	1,407
Economic occupancy rate	93.1%	93.0%	93.2%
Property costs, SEK/sq.m.	376	368	378
Net operating income, SEK/sq.m.	1,004	914	933
Property value, SEK/sq.m.	21,967	18,762	20,417
Number of properties	631	683	647
Lettable area, thousand sq.m.	4,162	4,408	4,283
Average valuation yield	5.1%	5.4%	5.3%

Castellum's real estate portfolio

	June 30, 2019			January-June 2019
Category	No. of proper ties	Area thou sand sq.m.	Property value MSEK	D:o/ sq.m.	Rental value MSEK	D:o/ sq.m.	Occup ancy rate	Income MSEK	Property costs MSEK	D:o/ sq.m.	Net operating income MSEK
OFFICE
Stockholm	28	282	10,765	38,203	311	2,209	94.8%	295	56	395	239
West	64	361	10,226	28,355	317	1,757	95.0%	301	59	329	242
Central	79	547	10,202	18,641	404	1,477	90.2%	365	97	355	268
Öresund	43	389	10,899	27,991	405	2,081	88.6%	359	85	436	274
North	2	5	93	18,423	4	1,526	92.0%	3	1	513	2
Finland	1	14	870	60,263	27	3,705	100.0%	27	6	812	21
Total Office	217	1,598	43,055	26,933	1,468	1,837	92.0%	1,350	304	381	1,046
PUBLIC SECTOR PROPERTIES
Stockholm	12	89	5,476	61,327	134	2,991	97.1%	130	22	484	108
West	15	110	2,148	19,518	73	1,328	93.2%	68	11	208	57
Central	29	307	8,166	26,620	261	1,702	97.6%	255	49	316	206
Öresund	8	91	3,281	36,123	99	2,174	97.9%	97	13	284	84
North	10	99	1,948	19,623	74	1,497	95.6%	71	15	303	56
Total Public sector properties	74	696	21,019	30,191	641	1,840	96.8%	621	110	315	511
WAREHOUSE /LOGISTICS
Stockholm	36	256	4,821	18,822	154	1,203	92.2%	142	23	180	119
West	68	586	6,631	11,311	233	795	89.9%	210	38	128	172
Central	29	146	1,199	8,246	59	813	92.5%	54	12	168	42
Öresund	28	193	1,767	9,157	83	857	90.1%	75	19	194	56
Total Warehouse/Logistics	161	1,181	14,418	12,211	529	896	90.9%	481	92	155	389
RETAIL
Stockholm	29	150	3,341	22,229	117	1,552	95.7%	112	18	240	94
West	14	53	879	16,503	34	1,292	95.4%	33	8	299	25
Central	20	108	1,737	16,115	70	1,299	96.5%	67	14	258	53
Öresund	11	46	832	18,270	34	1,510	84.9%	29	6	296	23
Total Retail	74	357	6,789	19,023	255	1,432	94.4%	241	46	262	195
LIGHT INDUSTRY
Stockholm	10	43	687	15,824	28	1,289	94.3%	26	5	243	21
West	16	66	673	10,200	28	836	95.3%	26	4	123	22
Central	12	46	387	8,514	20	878	97.5%	19	4	175	15
Öresund	4	42	328	7,786	16	749	91.5%	15	3	123	12
Total Light industry	42	197	2,075	10,534	92	927	94.8%	86	16	161	70
Total investment properties	568	4,029	87,356	21,679	2,985	1,481	93.1%	2,779	568	282	2,211
Leasing and property admin									189	94	-189
Total after leasing and property admin									757	376	2,022
Development	36	133	3,127	–	49	–	–	29	16	–	13
Undeveloped land	27	–	944	–	–	–	–	–	–	–	–
Total	631	4,162	91,427	–	3,034	–	–	2,808	773	–	2,035

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 2,035 accounted for above and the net operating income of MSEK 2,044 in the income statement is explained by the deduction of the net operating income of MSEK 57 on properties sold during the year, as well as the adjustment of the net operating income of MSEK 48 on properties acquired/completed during the period, 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.

Customers

Castellum's real estate portfolio and customer segments

Castellum's portfolio is well distributed over various segments, whereby almost half consist of office buildings and a quarter comprise public service 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 7% of income value, but this segment includes grocery stores and car dealerships. Another type of retail exposure also occurs in the storage/logistics segment, in the form of storage and distribution from the fast-growing e-commerce segment, which favours rental growth and contributes to the transformation of well-situated properties in the form of the last mile.

Lease maturity structure

Contract maturity for Castellum's portfolio appears in the table below. The relatively low proportion of contracts to reach maturity during 2019 is primarily due to the fact that most contracts have already been renegotiated.

LEASE MATURITY STRUCTURE 06-30-19
MSEK	No. of leases	Lease value MSEK	Percentage of value
Commercial, term
2019	736	70	1%
2020	1,817	908	17%
2021	1,170	907	17%
2022	1,130	996	19%
2023	434	622	12%
2024+	455	1,632	31%
Total commercial	5,742	5,135	97%
Residential	441	41	1%
Parking spaces and other	5,855	88	2%
Total	12,038	5,264	100%

Risk exposure, credit risk

Castellum's lease portfolio features a good risk exposure. The Group has approx. 5,700 commercial leases and 440 residential leases, and their distributing 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	2,719	22%	214	4%
0.25-0.5	956	8%	350	7%
0.5-1.0	795	7%	561	10%
1.0-3.0	757	6%	1,291	24%
< 3.0	515	4%	2,719	52%
Total	5,742	47%	5,135	97%
Residential	441	4%	41	1%
Parking spaces and other	5,855	49%	88	2%
Total	12 ,038	100%	5,264	100%

COMMERCIAL LEASES DISTRIBUTED BY SECTOR

CASTELLUM HALF-YEAR REPORT JANUARY-JUNE 2019

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. July 2019	incl.land MSEK	inv. 2019, MSEK	Remain inv. MSEK	Completed	Category
Öskaret 1, Stockholm (former Sabbatsberg 24)	9,092	45	4,950	28%	419	133	183	Q2 2020	Reconstruction office
Hisingen logistic park phase 2, Gothenburg	34,484	24	700	100%	294	130	164	Q2 2020	New construction logistics
Masthugget 26:1, Gothenburg	4,185	13	3,200	0%	229	38	153	Q1 2020	New construction office
Örnäs 1:17, Upplands-Bro	15,719	15	1,000	0%	204	65	69	Q4 2019	New construction warehouse/ logistics
Generatorn 1, Mölndal	6,800	13	1,600	100%	141	35	5	Q3 2019	New construction office/ warehouse
Tibble 1:647, Brunna	8,894	12	1,300	8%	140	29	15	Q3 2019	New construction warehouse/ light industry
Backa 20:5, Gothenburg	4,852	9	1,750	100%	103	35	15	Q3 2019	New construction car dealership
Developments completed/partly moved in
Olaus Petri 3:244, Örebro	15,023	37	2,450	100%	495	66	42	Q1 2019	New construction office
Spejaren 4, Huddinge	9,300	24	2,600	89%	349	63	49	Q2 2019	New construction car dealership
Smygmaskan 1, Malmö	9,600	26	2,700	95%	347	88	47	Q2 2019	New construction office
Total developments > MSEK 100					2,721	682	742

Larger acquisitions

	Area,	Rental value
Property	sq.m.	MSEK	SEK/sq.m.	Econ.occup. April 2019	Acquisition MSEK	Access	Category
6 properties in Linköping	67,387	109	1,600	97%	1,631	March 2019 Office
Gullbergsvass 1:12 and 1:2, Gothenburg	16,604	42	2,550	98%	864	March 2019 Office
Part of the harbour 22:31, Malmö	-	-	-	-	144	April 2019	Land, new construction E.ON

Largers sales

	Area,		Rental value	Underlying	Deferred tax and transaction
Property	sq.m.	MSEK	SEK/sq.m.	property price MSEK	costs, MSEK	Net sales price, MSEK	Vacancy	Category
20 properties in Sundsvall	154,491	258	1,650	3,462	-137	3,325	March 2019	Office, public sector properties, retail
Boländerna 28:4, 28:4, 35:1 and 35:2, Uppsala	49,795	69	1,396	694	-26	668	April 2019	Retail

NOTE 9 Goodwill

In 2016, the CORHEI and Norrporten companies were acquired. In connection to the acquisitions, a goodwill situation arose, primarily related to the difference between nominal tax, and the calculated supplementary tax which was applied at time of acquisition. 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. In the first quarter of the year, the entire portfolio in Sundsvall was divested, which results in an impairment of MSEK 179. In parallel United Spaces, a coworking company, was acquired during the same period, resulting in increased goodwill of MSEK 210. Goodwill for the year thus changed by MSEK 32.

NOT 9 Leasing agreement

IFRS 16 Leases entered force on January 1, 2019, meaning that Castellum must valuate its leases and recognize the right-of-use as an asset with a corresponding liability. At the balance sheet date, the value of Castellum's leases was approximately MSEK 868, divided into site leasehold agreements of SEK 483 million and rental agreements in United Spaces, the coworking company acquired during the year, of MSEK 385. There were no retroactive applications.

NOTE 10 Interest bearing liabilities and liquid assets

Castellum must maintain a low level of financial risk, meaning a medium- to long-term LTV ratio of less than 50% and an interest coverage ratio of not less than 200%.

Interest bearing liabilities

At the end of the period, Castellum held credit agreements totalling MSEK56,845 (56,358) of which MSEK 45,130 (45,962) were long-term and MSEK 11,715 (10,396) were short-term. Of the utilized borrowing facilities at the end of the period, MSEK 29,280 (30,862) was long-term and MSEK 10,805 (9,253) short-term.

After deduction of cash of MSEK 157 (243), net interestbearing liabilities were MSEK 40,085 (40,115), of which MSEK 23,473 (21,599) were MTNs outstanding and MSEK 4,993 (5,360) commercial paper outstanding (nominal MSEK 23,505 and MSEK 4,997 respectively).

During first half of 2019, bank credit facilities of approximately MSEK 2,400 were extended, approx. MSEK 1,000 terminated and the framework amount of Castellum's MTN program was raised to MSEK 20,000. Castellum was also active in the Swedish bond market during first 6 months of 2019 and bonds with a nominal value of MSEK 1,500 matured while new issues amounted to MSEK 2,300 as part of Castellum's Swedish MTN program. Moreover, a nominal amount of MNOK 850 was issued with a ten-year tenor under Castellum's EMTN program. After the end of the accounting period, a further bond issue of MSEK 300 was completed and bank credit facilities were increased MSEK 200.

Most of Castellum's borrowings are revolving bank credit facilities, which gives 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 including the EMTN program.

Of net interest-bearing liabilities totalling MSEK 40,085 (40,115), MSEK 10,863 (12,400) was secured against property deeds and MSEK 29,222 (27,715) was unsecured, which means that approximately 27% (31%) of loans outstanding were secured. The proportion of secured financing used, with the addition of commercial paper outstanding backed by secured bank credit commitments, was thus 17% (20%) of the properties' value.

Castellum's share of unsecured assets at the end of the period was 56% (53%). Secured borrowing in relation to total assets was 11% (13%). The financial covenants stipulate an LTV ratio not exceeding 65%, an interest coverage ratio of at least 150% and for EMTN also that the share of secured borrowing may not exceed 45% of the Group's total assets, which Castellum fulfils with comfortable margins: 44%, 485% and 11% respectively. The average duration of Castellum's credit agreements was 3.2 years (3.4). Margins and fees on long-term credit agreements had an average duration of 2.9 years (3.0).

Castellum has an official credit rating from the credit rating institute Moody's. The credit rating was upgraded in June to investment grade level at Baa2 with a stable 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 06-30-2019

		Utilized in
Credit agreements	MSEK	Bank	MTN/Cert	Total
0 - 1 year	11,715	1,989	8,816	10,805
1 - 2 years	11,185	2,011	3,474	5,485
2 - 3 years	10,494	3,103	3,391	6,494
3 - 4 years	8,328	3,229	3,499	6,728
4 - 5 years	11,284	11	6,723	6,734
> 5 years	3,839	1,276	2,563	3,839
Total	56,845	11,619	28,466	40,085

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 2.8 years (3.1). The average effective interest rate as per of June 30, 2019 was 1.9% (2.0%). 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 7,177 (6,895), 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.

INTEREST RATE MATURITY 06-30-2019

	Credit, MSEK	Average interest rate	Volume payable interest, MSEK	Closed payable interest	Volume receivable interest, MSEK	Closing receivable interest	Closing interest rate	Average interest rate
0 - 1 year	26,547	1.3%*	3,402	1.0%	– 14,237	0.1%	2.3%	0.2 year
1 - 2 years	3,699	1.6%	1,940	1.3%	0	0.0%	1.5%	1.4 years
2 - 3 years	1,948	1.4%	1,250	0.1%	0	0.0%	0.9%	2.3 years
3 - 4 years	1,299	1.9%	1,700	0.5%	0	0.0%	1.1%	3.5 years
4 - 5 years	5,275	2.1%	4,850	2.3%	– 4,766	2.2%	2.3%	4.5 years
5 - 10 years	1,317	3.7%	6,800	1.9%	– 938	4.2%	1.9%	8.2 years
Total	40,085	1.5%	19,941	1.6%	– 19,941	0.8%	1.9%	2.8 years

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

NOTE 10 Interest rate and currency derivatives

Castellum utilizes interest rate derivatives to achieve the desired interest rate maturity structure. At the end of the period, the derivative portfolio was restructured to correspond with a deficit value of MSEK 215. In accordance with the IFRS 9 accounting standard, derivatives are subject to market valuation. If the agreed interest rate deviates from the market interest rate, notwithstanding credit margins, a theoretical surplus or deficit value arises in the interest rate derivatives, where changes in value not affecting the cash flow are recognized in profit or loss. 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 holds derivatives in order to hedge currency fluctuation in its investments in Denmark and Finland as well as to manage currency risk

and adjust its interest rate structure in connection with borrowing in the international capital market. 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 June 30, 2019, the market value of the interest rate derivatives portfolio amounted to MSEK – 769 (– 689) and the currency derivative portfolio to MSEK 68 (- 27). 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%	44%
Intererst coverage ratio	At least 200%	At least 150%	485%
The share of secured borrowing/total assets		Not exceeding 45%	11%
Funding risk
– average capital tied up	At least 2 years		3.2 years
– proportion maturing within 1 year	No more than 30% of outstanding loans and unutilized credit agreements		13%
– average maturing credit price	At least 1.5 years		2.9 years
– liquidity reserve	Secured credit agreements corresponding to MSEK 750		Achieved
	and 4.5 months upcoming loan maturities
Interest rate risk
– average interest duration	1.5 - 3.5 years		2.8 years
– proportion maturing within 6 months	No more than 50%		35%
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 hedged		Not hedged
– transaction exposure	Handled if exceeding MSEK 25		Less than MSEK 25

Condensed consolidated Cash Flow statement

MSEK	2019 April-June	2018 April-June	2019 Jan-June	2018 Jan-June	Rolling 12 months July 18-June 19	2018 Jan-Dec
Net operating income	1,067	1,002	2,044	1,940	4,049	3,945
Central administrative expenses	– 42	– 38	– 90	– 84	– 164	– 158
Reversed depreciations	20	5	29	9	39	19
Net interest rate paid	– 206	– 212	– 363	– 446	– 746	– 829
Tax paid	58	32	–74	– 8	– 141	– 75
Translation difference of currencies	25	36	59	36	31	8
Cash flow from operating activities before change in working capital	922	825	1,605	1,447	3,068	2,910
Change in current receivables	93	53	– 157	– 195	– 187	– 225
Change in current liabilities	- 471	– 143	– 190	– 203	120	107
Cash flow from operating activities	544	735	1,258	1,049	3,001	2,792
Investments in new constructions, extensions and reconstructions	– 696	– 741	– 1,473	– 1,437	– 2,873	– 2,837
Property acquisitions	– 252	– 981	– 2,770	– 1,019	– 4,206	– 2,455
Change in liabilities at acquisitions of property	127	– 19	133	– 8	149	8
Property sales	36	155	4,057	387	6,305	2,635
Change in receivables at sales of property	622	19	125	13	– 37	– 149
Other investments	– 22	– 16	- 274	– 32	– 327	– 85
Cash flow from investment activities	– 185	– 1,583	– 202	– 2,096	– 989	– 2,883
Change in long term liabilities	– 113	898	– 77	1,643	305	2,025
Change in short term liabilities	– 24	–	– 16	9	– 14	11
Swap termination	– 215	–	– 215	–	– 672	– 457
Dividend paid	–	–	– 834	– 724	– 1,558	– 1,448
Cash flow from financing activities	– 352	898	- 1,142	928	– 1,939	131
Cash flow for the period/ year	7	50	– 86	– 119	74	40
Liquid assets opening balance	150	34	243	203	84	203
Liquid assets closing balance	157	84	157	84	157	243

The Parent company

Condensed Income statement MSEK	2019 April-June	2018 April-June	2019 Jan-June	2018 Jan-June
Income	20	18	40	34
Operating expenses	– 49	– 44	– 107	– 92
Net financial items	10	17	19	2
Change in derivatives	– 199	– 18	– 345	– 25
Income before tax	– 218	– 27	– 393	– 81
Tax	6	6	13	18
Net income for the period/year	– 212	– 21	– 380	– 63
Comprehensive income for the parent company
Net income for the period/year	- 212	– 21	- 380	– 63
Items that will be reclassified into net income Translation difference foreign operations	27	42	67	131
Unrealized change, currency hedge	- 26	– 42	- 50	– 131
Total net income for the period/year	- 211	– 21	- 363	– 63

Condensed Balance sheet MSEK	June 30 2019	June 30 2018	Dec 31 2018
Participations, group companies	19,907	19,675	19,678
Receivables, group companies	38,092	38,263	39,423
Other assets	114	193	109
Liquid assets	50	0	1
Total	58,163	58,131	59,211
Shareholders' equity	15,788	16,282	17,818
Derivatives	701	1,323	716
Interest bearing liabilities	37,541	36,151	36,738
Interest bearing liabilities, group companies	3,087	3,509	3,711
Other liabilities	1,046	866	228
Total	58,163	58,131	59,211
Pledged assets (receivables group contributions)	17,349	24,032	17,387
Contingent liability (guaranteed commitments for subsidiaries)	2,552	3,638	3,616

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 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 run 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	+61/–61	+	–
Property costs	-15/+15	–	0
Interest costs*	-77/43	0	–

* The asymmetry is due to the fact that at present, Castellum deems the opportunities for fully including negative market rates to be limited.

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 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. An increasing demand results in lower required yields and hence an upwarded 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 reflect the uncertainty that exists in the assumptions and calculations made.

SENSITIVITY ANALYSIS - CHANGE IN VALUE
Properties	-20%	-10%	0%	+10%	+20%
Changes in value, MSEK	- 18,285	- 9,143	-	9,143	18,285
Loan-to-value ratio	55%	49%	44%	40%	37%

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 2018, "Risk and Risk management" on pages 92-100.

CASTELLUM'S CREDIT RATING RAISED BY MOODY'S

In early June, Castellum was awarded an upgraded investment grade to "Baa2" stable outlook from Moody's, the international credit rating institution. The rating is based on the company's strong property portfolio and financial position.

"Receiving a raised credit rating is extremely valuable to Castellum. It is proof that we are doing the right thing from both a financial and a business perspective. Market confidence in our company is a condition for future investments. At the same time, the improved credit rating provides Castellum with even greater possibilities for strong financial flexibility and an expanded investor base, both nationally and internationally."

Ulrika Danielsson, CFO, Castellum

Financial Key Ratios

A number of the financial measures presented by Castellum in the interim report are not defined in accordance with the 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 the IFRS. Unless otherwise stated, the table below presents measures, along with their reconciliation, which are not defined according to the IFRS. Definitions for these measures appear on the page 24.

	April-June 2019	April-June 2018	Jan-June 2019	Jan-June 2018	Rolling 12 months July 18-June 19	Jan-Dec 2018
Average number of shares, thousand (related to financial key ratios)	273,201	273,201	273,201	273,201	273,201	273,201
Outstanding number 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 in property management income. Income from property management also forms the basis of the annual shareholder dividend: at least 50% of property-management income. 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.

	April-June 2019 MSEK SEK/share			April-June 2018 MSEK SEK/share	Jan-June 2019 MSEK SEK/share		Jan-June 2018 MSEK SEK/share		MSEK SEK/share	Rolling 12 months July 18-June 19	Jan-Dec 2018 MSEK SEK/share
Income before tax	1,825	6.68	1,383	5.06	2,940	10.76	2,272	8.32	8,988	32.90	8,320	30.45
Reversed:
Transaction and restructuring costs	9	0.03	–	–	9	0.03	–	–	9	0.03	–	–
Goodwill down-writing	–	–			179	0.66			179	0.66
Changes in value, properties	– 1 ,193	– 4.37	– 596	– 2.18	–1,882	– 6.89	– 827	– 3.03	– 6,271	-22.95	– 5,216	– 19.09
Changes in value, derivatives	176	0.65	– 32	– 0.12	297	1.09	– 25	– 0.09	170	0.62	– 152	– 0.55
= Income from property management	817	2.99	755	2.76	1,543	5.65	1,420	5.20	3,075	11.26	2,952	10.81

EPRA Earnings (Income from property management after tax)
Income from property management	817	2.99	755	2.76	1,543	5.65	1,420	5.20	3,075	11.26	2,952	10.81
Reversed; Current tax income from pro perty management	– 103	– 0.38	– 63	– 0.23	– 187	– 0.69	– 108	– 0.40	– 395	–1.45	– 316	– 1.16
EPRA Earnings / EPRA EPS	714	2.61	692	2.53	1,356	4.96	1,312	4.80	2,680	9.81	2,636	9.65

Net Asset Value

Net asset value is the total equity which 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.

	June 30, 2019 MSEK SEK/share		June 30, 2018 MSEK SEK/share		Dec 31, 2018 MSEK SEK/share
Equity according to the balance sheet	40,727	149	34,847	128	39,749	145
Reversed:
Declared, undistributed dividend	833	3	724	2	–	–
Derivatives according to balance sheet	701	3	1,323	5	716	3
Goodwill according to balance sheet	– 1,490	– 6	– 1,659	– 6	– 1,659	– 6
Deferred tax according to balance sheet	9,433	33	8,257	30	9,203	34
Long term net asset value (EPRA NAV)	50,204	184	43,492	159	48,009	176
Deduction
Derivatives as above	- 701	– 3	– 1,323	– 5	– 716	– 3
Estimated real liability, deferred tax 6%*	– 2,938	– 11	– 2,547	– 9	– 2,975	– 11
Short term net asset value (EPRA NNNAV)	46,565	170	39,622	145	44,318	162

* Estimated real deferred tax liability net has been calculated to 6% 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 20%, 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 7%, which gives a present value of deferred tax liability of 6%.

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	April-June 2019	April-June 2018	Jan-June 2019	Jan-June 2018	Rolling 12 months July 18-June 19	Jan-Dec 2018
Income from property management	817	755	1,543	1,420	3,075	2,952
Reversed;
Net interest	202	209	401	436	800	835
Income from property management excl. net interest	1,019	964	1,944	1,856	3875	3,787
Interest coverage ratio	504%	461%	485%	426%	484%	454%

Cont. Financial Key Ratios

Loan to value ratio	June 30, 2019	June 30, 2018	Dec 31, 2018
Interest-bearing liabilities	40,242	39,992	40,358
Liquid assets	- 157	- 84	- 243
Net interest-bearing liabilities net	40,085	39,908	40,115
Investment properties	91,427	84,298	89,168
Acquired properties not taken into possession	- 164	- 15	- 31
Divested properties still in Castellum's possession	39	2	164
Net investment properties	91,302	84,285	89,301
Loan-to-value ratio	44%	47%	45%

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.

Proportion of the property value, %	1%	2%	0%	3%	1%	3%
Net investments	912	1,567	186	2,069	774	2,657
Net sales prices	– 36	– 155	– 4,057	– 387	– 6,305	– 2,635
Total investments	948	1,722	4,243	2,456	7,079	5,292
New constructions, extensions and reconstructions	696	741	1,473	1,437	2,873	2,837
Acquisitions	252	981	2,770	1,019	4,206	2,455
Net investments	April-June 2019	April-June 2018	Jan-June 2019	Jan-June 2018	Rolling 12 months July 18-June 19	Jan-Dec 2018

Other Financial Key Ratios

	April-June 2019	April-June 2018	Jan-June 2019	Jan-June 2018	Rolling 12 months July 18-June 19	Jan-Dec 2018
Net operating income margin	76%	72%	72%	71%	71%	71%
Interest rate level, on average	2.1%	2.3%	2.1%	2.3%	2.1%	2.2%
Return on long term net asset value	13.9%	15.0%	12.7%	11.6%	17.5%	18.5%
Return on actual net asset value	14.5%	20.6%	14.0%	14.7%	19.8%	22.0%
Return on total capital	9.4%	7.3%	8.3%	6.3%	11.5%	10.6%
Return on equity	12.6%	20.0%	13.3%	14.7%	22.4%	22.6%
Property value, SEK/share	335	309	335	309	335	326
Gross leasing	83	120	170	232	346	408
Net leasing	11	80	4	128	37	161

Accounting principles

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 Interim report.

IFRS 16 Leases entered force on January 1, 2019, and Castellum has applied the recommendation as of that date. There were thus no retroactive applications. The transition to IFRS 16 had no material impact on the Group's earnings and financial position, or on its cash flow statement. In its capacity as lessee, Castellum has conducted a detailed review and analysis of the Group's leases, during which site leasehold agreements were identified as the single most material alongside rental agreements in United Spaces, the coworking company acquired during the year. Apart from these two items, only a smaller number of leases have been identified, such as for vehicles, office equipment and the like. As a consequence of the transition to IFRS 16, the cost for site leasehold fees as a whole was reported as a financial expense — a difference compared to previous policies, in which this was reported as an operating cost charged to net operating income. Moreover, the rental cost for United Spaces is allocated between impairments and financial expenses. Site leasehold agreements and leases at United Spaces have been valued and the right-of-use has been recognized as an asset together with a corresponding liability. At June 30, 2019, the combined value of these two items was MSEK 868. In addition, a review was conducted of how the Group's policies applied in its capacity as lessor are impacted by IFRS 16, in which connection Castellum verified that IFRS 16 entails no material effect on the Group's reported rental incomes.

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

Signing of the report Auditor's Report

The Board of Directors and the Chief Executive Officer assure that the Half-year report provide a fair view of the parent company's and the Group's operations, financial position and result as well as describes significant risks and uncertainties that the parent company and the companies included in the Group are faced with.

Gothenburg July 12, 2019

Charlotte Strömberg Per Berggren

Board member Board member

Christina Karlsson Kazeem Nina Linander Board member Board member

Johan Skoglund Henrik Saxborn Board member CEO

Anna-Karin Hatt Christer Jacobson

This information is information that Castellum is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 08.00 a.m. CET on Friday July 12, 2019.

Events after the reporting period

No significant events occurred after the end of the period.

Independent Auditor's Report on review of half-year financial information

To the Board of Directors in Castellum AB (publ)

Corp. id. no. 556475-5550

Introduction

We have reviewed the half-year report for Castellum AB (publ) for the period January 1 - June 30, 2019. The Board of Directors and the President are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of Review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review has a different focus and is substantially less in scope than an audit conducted in accordance with ISA and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that would make us aware of all significant matters that might be identified in an audit. Therefore, the conclusion expressed based on a review does not give the same level of assurance as a conclusion expressed based on an audit.

Conclusion

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

Gothenburg July 12, 2019 Deloitte AB

Hans Warén

Authorized Public Accountant

The Castellum share

The Castellum share is listed on Nasdaq Stockholm Large Cap. At the end of the period the company had about 49,600 shareholders. The ten individual largest owner constellations confirmed as of June 30, 2019 are presented in the table below.

SHAREHOLDERS 06-30-2019

Shareholders	Number of shares, thousand	Percentage of voting rights and capital
Rutger Arnhult	16,476	6.0%
APG Asset Management	15,124	5.5%
PGGM Pensioenfonds	14,544	5.3%
BlackRock	13,774	5.0%
SEB Fonder & Liv	11,011	4.0%
Vanguard	8,948	3.3%
Szombatfalvy-sphere	8,619	3.2%
AMF Försäkring & Fonder	8,132	3.0%
Lannebo Fonder	8,043	2.9%
SHB Fonder & Liv	4,317	1.6%
Board and Executive Management Castellum	172	0.1%
Other shareholders registered in Sweden	64,607	23.6%
Shareholders registered abroad	99,434	36.5%
Total registered shares	273,201	100.0%

There is no potential common stock (e.g. convertibles)

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

The Castellum share price as of June 30, 2019 was SEK 177.55 (145.15) equivalent to a market capitalization of SEK 48.5 billion (39.7), calculated on the number of outstanding shares.

Since the beginning of the year a total of 138 million (147) shares were traded, equivalent to an average of 1,134,000 shares (1,192,000) per day, corresponding on an annual basis to a turnover rate of 104% (109%). 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 184 per share (159). The share price at the end of the year was thus 95% (92%) 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 9.81 (9.12) on rolling annual basis. This results in a share price yield of 5.6% (6.3%) corresponding to a multiple of 18 (16).

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

Net income after tax amounted on rolling annual basis to SEK 27.87 per share (20.70), which from the share price gives a yield of 15.9% (14.3%), corresponding to a P/E of 9 (7).

Dividend yield

The recent AGM approved dividend of SEK 6.10 (5.30) corresponds to a yield of 3.4% (3.7%) based on the share price at the end of the period. Of the dividend, SEK 3.05 has been issued in March and the remainder will be paid out in September.

Total share yield

During the last 12-month period the total yield of the Castellum share has been 26.5% (22%), 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 real estate 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	3,075	3,075	3,075
Change in property value (on average 10 years)	3.0%	2.0%	4.0%
D:o MSEK	2,529	1,686	3,372
Current tax 9%	– 305	– 305	– 305
Earnings after tax	5,299	4,456	6,142
Earnings SEK/share	19.40	16.31	22.48
Return on actual long-term net asset value	10.2%	8.7%	11.7%
Earnings/share price	11.1%	9.3%	12.9%
P/E	9	11	8

June 30, 2019	June 30, 2018	Dec 31, 2018
1,356	1,312	2,636
4.96	4.80	9.65
50,204	43,492	48,009
184	159	176
46,565	39,622	44,318
170	145	162
7%	7%	7%
5,0%	5.3%	5.1%
5,1%	5.4%	5.2%

GROWTH, YIELD AND FINACNCIAL RISK			40%
	1 year	3 years aver- age/ year	10 years aver- age/ year
Growth
Rental income SEK/share	6%	3%	4%
Income from property mgmnt SEK/share	14%	9%	7%
Net income for the year after tax SEK/share	35%	17%	e.t.
Dividend SEK/share	15%	13%	8%
Long term net asset value SEK/share	16%	14%	10%
Actual net asset value SEK/share	17%	15%	11%
Real estate portfolio SEK/share	8%	7%	8%
Change in property value	7%	6%	3%
Yield
Return on actual long term net asset value	17.5%	19.9%	13.9%
Return on actual net asset value	19.8%	19.9%	14.2%
Return on total capital	11.5%	10.3%	7.8%
Total yield of the share (incl. dividend)
Castellum	26.5%	17.5%	19.2%
Nasdaq Stockholm (SIX Return)	10.8%	12.9%	13.5%
Real Estate Index Sweden (EPRA)	31.0%	18.2%	22.5%
Real Estate Index Europe (EPRA)	-1.4%	4.8%	12.8%
Real Estate Index Eurozone (EPRA)	-4.3%	5.0%	12.5%
Real Estate Index Great Britain (EPRA)	-6.0%	4.1%	11.0%
Financial risk
Loan-to-value ratio	44%	47%	50%
Interest coverage ratio	479%	414%	341%

THE SHARE'S DIVIDEND YIELD

SHARE PRICE/NET ASSET VALUE Multipel

YIELD EARNINGS PER SHARE

THE CASTELLUM SHARE'S PRICE TREND AND TURONVER SINCE THE IPO, MAY 23, 1997 UNTIL JUNE 30, 2019

Definitions

SHARE RELATED KEY RATIOS

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.

PROPERTY RELATED KEY RATIOS

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, public sector properties (customers that are directly or indirectly tax funded), warehouse/logistics, light industry, retail 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.

FINANCIAL KEY RATIOS

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 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 occurring 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

Interim report January - September 2019 18-Oct-19 Year-end Report 2019 24-Jan-20 Annual report 2019 Week 6, 2020 Annual General Meeting 2020 19-March-20

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For further information please contact : Henrik Saxborn, CEO, phone +46 31 60 74 50 Ulrika Danielsson, CFO, phone +46 706 47 12 61

About Castellum

CASTELLUM HALF-YEAR REPORT JANUARY-JUNE 2019

Castellum is one of the largest listed real estate companies in Sweden. Property values amount to SEK 91.4 billion and holdings comprise office, warehousing/logistics and public sector properties, covering a total leasable area of 4.2 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