INTERIM REPORT JANUARY–SEPTEMBER 2020

Strong period with a 9% growth of income from property management

Important events during the quarter

The single largest event during the quarter is the ongoing coronavirus crisis. Castellum has so far managed the extreme conditions in its business environment very well.

During the quarter, Castellum's office building, Eminent, in Malmö became the first WELL certified building in the Nordic region. The WELL Building Standard is targeted at the people who will be working in the building and is the only international construction standard that takes people's wellness during their working lives into considerations.

During the quarter, Castellum became a partner in the Exponential Roadmap Initiative, thereby supporting the 1.5°C Business Playbook, a tool that guides businesses and organisations with strategies to achieve the goals of the Paris Agreement.

Income for the period January–September 2020 totalled MSEK 4,488 (4,343 for the corresponding period last year).
Income from property management amounted to MSEK 2,588 (2,380), corresponding to SEK 9.48 (8.71) per share, an increase of 9%.
Changes in value on properties amounted to MSEK 816 (2,505) and on derivatives to MSEK –212 (–417).
Net income after tax for the period amounted to MSEK 2,549 (3,637), corresponding to SEK 9.33 (13.31) per share.
Long-term net reinstatement value (EPRA NRV) amounted to SEK 200 per share (186), an increase of 8%.
Net lettings for the period amounted to MSEK 191 (–38).
Net investments amounted to MSEK 1,996 (741) of which MSEK 317 (2,789) pertained to acquisitions, MSEK 1,800 (2,061) to new construction, extensions and reconstructions, and MSEK 121 (4,109) to sales.

KEY METRICS	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Jan–Dec 2019
Income, MSEK	1,489	1,472	4,488	4,343	5,821
Net operating income (NOI), MSEK	1,122	1,058	3,292	3,102	4,113
Income from property management, MSEK	899	837	2,588	2,380	3,146
NOI SEK/share	3.29	3.06	9.48	8.71	11.52
NOI growth	+8%	+5%	+9%	+7%	+7%
Net income after tax, MSEK	1,015	1,051	2,549	3,637	5,650
Net investment, MSEK	618	555	1,996	741	1,974
Net lettings, MSEK	–9	–42	191	–38	–24
Loan-to-value ratio	43%	44%	43%	44%	43%
Interest coverage ratio	581%	550%	545%	505%	502%
Net reinstatement value (EPRA NRV), SEK/share	200	186	200	186	195
Net tangible assets (EPRA NTA), SEK/share	191	178	191	178	187
Net disposal value (EPRA NDV), SEK/share	157	147	157	147	154

Cover: The images on the front and back pages show sketches of Castellum's office building being constructed for the Swedish Police in central Örebro. The building is being constructed entirely out of wood, with the objective of achieving a net zero carbon emissions during its lifetime. The project will achieve climate neutrality primarily by building the framework in wood rather than steel and concrete.

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

On stable ground

Castellum has posted stable development over the first nine months of the year, despite the extreme conditions in its business environment. During the third quarter, income from property management increased 8%, which totalled 9% for the entire period.

While it is true that net lettings stood at MSEK –9, this included the termination from Ferring in Copenhagen totalling MSEK –56 that had been known years in advance. Otherwise, the letting situation in the third quarter was better than the year-earlier period.

From a valuation perspective we have also noted a slight increase, which resulted in a rise in the net asset value to SEK 200 per share despite the distribution of a dividend of SEK 3.25 during the period.

More importantly is perhaps that rent payments for the fourth quarter are doing well and following the same payment pattern as previous quarters.

The loan-to-value ratio and occupancy rate remain relatively unchanged, at 43% and 93% respectively.

Investments during the year totalled SEK 2 billion, while ongoing project volumes totalled SEK 6 billion with an emphasis on public sector properties.

The credit market has tangibly improved since the summer, and the bond market has come back to life.

Castellum thus stands on stable ground.

Healthy risk spread in the portfolio

Conditions for our customers, and thus for our property portfolio, are different at the moment. The logistics market is growing very strongly, in pace with the growing e-commerce. Government authorities and state civil service departments are expanding, providing stability in the cash flow while the offices with the highest rental levels in CBD Stockholm are regularly discussed.

Let me therefore shed light upon our starting position. At present, the allocation of Castellum's property values is as follows:

ALLOCATION OF PROPERTY VALUES
48% (of which major cities 63%, regional cities 37%)
Public sector properties 23%
17%
7%
3% (E.ON, Swedish Courts, Castellum Säve, etc.)
2%

So what can we expect? Focus during the coronavirus pandemic has naturally been on office use, especially in the most central and most expensive locations. Despite state support during the pandemic, we expect somewhat weaker growth in certain customer segments going forward. The composition of our portfolio, however, with geographic spread, a growing logistics market and a large share of government authorities and state agencies provides us with the stability to meet harder times.

The keyword is flexibility

A number of surveys on future office use have been conducted in the wake of the coronavirus pandemic, questions we also discuss with our customers. The conclusion is that business leaders believe in a mix of working remotely and physical presence in the office going forward. Making the office even more attractive for employees is high on many managers' agendas, since motivation, creativity and solidarity certainly increase when we also meet away from computer monitors.

The office will remain extremely important for many reasons, but not necessarily as a mandatory workplace from 9 to 5, Monday through Friday. Looking back at the history of the office, there have been many leaps in development that have changed how we work. If office landscapes were the latest great leap, flexible working is the next one. Castellum will be on the front line in driving the development of Office 2.0.

The flexible workplace is a dynamic and stimulating arena for meetings. Working remotely, co-working and our WorkOUT outdoor office concept provides us with greater flexibility and added value for a workplace that is tailored to the differing needs of people at different stages of life. Co-working, which we offer through our subsidiary United Spaces, is growing and expanding its territory in Stockholm, Uppsala and Helsingborg. Co-working provides flexibility through shorter contracts, full service and the possibility of working at different locations around the clock.

Slowdown going forward

Despite the strong start to the year, we are noting a slowdown towards the end of the year. Though Castellum has managed the pandemic well, we cannot ignore the fact that the overall effects on society have been negative. It is

important to note, however, that growth in rental income will be limited in the coming quarters. This is not only due to the effects of the coronavirus, but above all because we are in a planning period with major projects that involve longer periods between letting and the first rent payments. Another reason

"Our diversified portfolio composition provides us with growth and stability."

for the slowdown is that renegotiations that have driven positive rental value since March have been postponed, which is beginning to be seen in the numbers. After two quarters with a slower pace due to COVID-19, we also see an increased rate of maintenance in existing stock, back to normal levels, in the last quarter. This postponement will negatively impact the final quarter of the year, despite healthy levels of letting in the projects.

The strong start to the year, however, means that shareholders can look forward to yet another year with good earnings and an increased dividend for the 23rd consecutive year.

Henrik Saxborn CEO

The plan is for Kungspassagen to be Uppsala's first WELL certified property. WELL is an international construction standard that is focused on people's health and wellness, and is based on seven features: air, water, nourishment, light, fitness, comfort and mind.

Market comments

Swedish, Danish and Finnish economies

The coronavirus pandemic dominated economic development both globally and in Sweden during most of 2020. The periodic closure of businesses and drastic restrictions to activities across society led to sharp declines in GDP and rapidly rising unemployment. Lately, however, the worst negative projections have been adjusted and the opinion among the majority of financial commentators is now that a slight economic recovery will be experienced during the latter half of the year compared with the particularly negative trend that left its mark primarily on the second quarter of 2020. Nonetheless, unemployment in Sweden is expected to rise to more than 9% in 2021. Sweden's GDP for the full-year 2020 is forecast to fall 3.6% and to then rise sharply, up +3.7% in 2021 and 2022 (Riksbank, September 2020). Low interest rates and very robust monetary policy and fiscal measures have helped to support financial markets. The Swedish housing market has so far not been negatively impacted but rather somewhat positively as regards price performance. The housing market could be impacted, however, if unemployment were to rise and economic activity were to fall further, resulting in additional adverse implications for GDP from slowing private consumption.

The 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 krona was weak in 2019 (TCW index) and continued to be so in the first quarter of 2020, but gained slightly in the spring and summer even though it weakened again somewhat in late September. According to the Riksbank (September 2020), inflation – expressed in terms of CPIF – will fall to +0.5% in 2020 and then rise to approximately +1.3% in 2021 and 2022.

Danish and Finnish GDP growth and unemployment respectively were also severely impacted, particularly in the second quarter of 2020, as a consequence of the global pandemic. Private consumption has also fallen, in a similar way to Sweden, but weaker export prospects have also had an adverse effect. Fiscal measures have been implemented with some positive effects in addition to the beneficial effects of a highly expansive monetary policy, though it remains unclear how positive an effect these will yield on performance over time. The main scenario, primarily for Denmark, is similar to that of Sweden: relatively strong recovery in 2021 following a sharp drop in GDP in 2020, while recovery in Finland is expected to be somewhat less robust in 2021.

Overall, this means the trend for the economy in the immediate future remains extremely difficult to assess.

MACRO INDICATORS – SWEDEN
9.3%	(August 2020, seasonally adjusted and equalised)
0.3%	(September 2020 compared with September 2019)
–8.3%	(Q2 2020 compared with Q1 2020)

Rental market

The coronavirus crisis continues to fundamentally change society. Restrictions around the world continued to be eased during the quarter, but at the same time troubling signs of a second wave were seen. In Sweden, further restrictions have been discussed and partially implemented. Signs of increased infection rates, however, have caused most of the restrictions to continue. Finland once again closed its border with Sweden during the quarter.

It remains too early to speak about the long-term effects of COVID-19 on rental and vacancy levels, but we can state that Castellum entered this crisis with historically low vacancy levels and record-high rental levels in all markets, at the same time as we continue to offer office space at the same rental levels as prior to the pandemic.

Despite uncertainty going forward, premises are still being shown and business transactions are still being conducted. This is also demonstrated by net lettings for Castellum in the third quarter and through September 2020 being up on the corresponding periods in 2019.

Rental levels remained stable in Stockholm, Gothenburg and Malmö as a result of continued low vacancy rates in the CBDs and the most attractive sub-markets. Over the short term, the offering of new construction will be limited and primarily let in advance. During the quarter, office rents in regional cities were stable.

The rents for offices in Helsinki's CBD remained stable during the quarter and consolidated on previous record levels. Strong demand has spread from Helsinki's CBD to surrounding areas; there are, however, still high vacancy rates in secondary areas, as well as in properties of lower quality. In Copenhagen, rents in the CBD remained stable during the quarter. The high level of access to land and building rights in and around the city is a limiting factor for rent potential.

The rental market in Sweden for warehouses/logistics spaces has been positive during the quarter, with rising rents in prime logistics locations, particularly in semi-central locations with good means of transportation and sorting yards (last-mile locations). This is driven by strong demand, based mainly on the growth in e-commerce, a growth trend that strengthened during the coronavirus crisis.

Source: Statistics Sweden

Property market

The volume for transactions over MSEK 40 in the transaction market in Sweden totalled around SEK 103 billion (~151) over 258 transactions (308) through 30 September 2020.

The investor sentiment in the Swedish property market remained strong during the quarter. There is a large interest in and capital for property investments in the market. In the third quarter of 2020, several transactions took place at record low yields in both the office and logistics segments, where a premium was put on secure cash flows in public sector and logistics properties. The share of foreign investors through 30 September 2020 was approximately 32% (42), which is a historic high. The Nordic property market remained attractive to international investors.

In Castellum's markets, the required yield for office properties remained stable during the quarter but the number of comparative transactions following the outbreak of the coronavirus crisis remains limited for the office segment.

Warehouse and logistics properties continue to attract a growing number of both domestic and international investors, driven largely by the growth of e-commerce. Low levels of supply among attractive logistics properties, in combination with high demand among investors, resulted in stable and in some cases falling yield requirements.

In Denmark, the transaction volumes in the property market totalled approximately DKK 36 billion (~34) through 30 September 2020. The mood among investors remains strong and a shift in investor interest from the housing segment to the office segment has been noted. The required yield for offices in the CBD in Copenhagen is assessed as remaining stable at 3.5%.

In Finland, the transaction volume in the Finnish property market totalled approximately EUR 3.4 billion (~4.9) through 30 September 2020. There is a considerable demand among investors for the most attractive objects, and the required yield for offices in the CBD is estimated at 3.4%, which is roughly on a par with Stockholm. Increased investor interest has been noted for secondary and development properties as well.

Altogether, this indicates a strong property market, despite the fact that the full macroeconomic effects of the pandemic are as yet not transparent. Most property categories remain very interesting, but in particular those with secure cash flows, such as public sector and logistics properties.

Interest and credit markets

In December 2019, Sweden's Riksbank raised interest rates from –0.25% to zero. The Riksbank's latest repo-rate path (September 2020) indicates that the repo rate will remain at zero at least until late 2023.

Swedish long-term interest rates fell drastically in 2019 until early autumn, when they bottomed out and subsequently trended upward again. However, the upswing broke off in early 2020 and, since then, long-term interest rates posted a downward trend that nonetheless flagged in the third quarter. At the end of the third quarter, the five-year swap rate was approximately 5 basis points (0.05%), unchanged compared with the half-year mark. Current levels are historically very low. STIBOR 3m, which rose gradually during the first quarter, fell back approximately 25 basis points to about +5 basis points at the end of June and continued slightly downward in the third quarter. At the end of September the STIBOR 3m was once again negative (i.e. 5 basis points below zero). Taken together, the yield curve was marginally positive between STIBOR 3m and the 5-year swap rate at the end of the third quarter.

Access to financing in the Swedish and international capital markets deteriorated radically at the end of the first quarter and credit spreads then widened drastically. The situation improved somewhat during the second quarter to become markedly better in late summer. The credit spread for investment-grade borrowers – at least in the Swedish bond market – has again approached the levels in effect around the beginning of the year, even though lending conditions in the property sector have not improved to the same extent as for most other sectors.

In Denmark, the CIBOR 3m fell about 10 basis points in the spring and summer after rising sharply in the first quarter of 2020, primarily in light of the Danish krona coming under a certain amount of pressure against the Euro, which led the central bank of Denmark to raise its marginal rate by 15 basis points. At the end of the third quarter of 2020, CIBOR 3m was around –0.2%, compared to –0.4% at the end of 2019. EURIBOR 3m also fell slightly during the spring and summer, following a temporary and relatively sharp rise in April and was about –0.5% at the end of the third quarter.

Castellum's agenda for the sustainable city

Castellum shall be one of the most sustainable property companies in Europe and a major player in the construction of a sustainable society. Our sustainability initiatives are fully integrated into our operations and are ingrained into the daily work with managing and developing our property portfolio, customer relations, employees and financing.

Castellum's sustainability agenda, "The sustainable city," is divided into four areas of focus: The Planet, Future-Proofing, Wellness and Social Responsibility. These areas of focus ensure that we conduct our operations responsibly and create long-term solutions from an economic, ecological and social perspective. The company has also established measurable targets that are monitored and reported annually.

Castellum is 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 fuel-free Sweden.

For a complete account of outcomes for 2019, refer to Castellum's Annual Report.

Events during the quarter

Castellum's office building, Eminent, in Malmö became the first building in the Nordic region to be WELL certified. The WELL Building Standard is targeted entirely at the people who will be working in the building and is the only international construction standard that takes into consideration people's wellness in their working lives. The goal is to increase wellness for people by developing environments with a focus on health and quality of life.

Due to the company's leading position in sustainability, Castellum was invited to participate in the EU-financed Carbon Risk Real Estate Monitor (CRREM) project. CRREM offers the property sector a comprehensive framework focused on exposure to carbon dioxide risk and potential strategies for reducing that risk. Through sharing its experiences in reducing carbon dioxide emissions in its operations, Castellum will continue to promote a new industry standard.

Castellum has become a partner in the Exponential Roadmap Initiative and thereby joined the 1.5°C Business Playbook, a tangible tool that guides businesses and organisations with strategies to achieve the goals of the Paris Agreement.

During the quarter, the audit and consulting company Grant Thornton signed an agreement to lease approximately 800 square metres in Castellum's office building, Kungspassagen, in Uppsala. With an outdoor gym, WELL certification and outside work spaces, Kungspassagen will be a property that puts people's health and wellness first.

Plans were solidified during the quarter for Castellum's new flexible logistics hub at Säve airport. In partnership with some of the country's foremost consulting companies and architects, the area will be transformed into a leading logistics hub and a place for the development of sustainable mobility. There are now several players there who are occupied with testing and developing electric, connected and autonomous vehicles as well as developing electric aircraft and drone technology.

Energy, carbon emissions and water, 2016–2020

Intensity is given in kWh per square metre, years for energy, m3 per square metre for water and kilogramme per square metre for carbon emissions.

	Q3 2020	2019	2018	2017	2016
Total energy use, kWh per sq. m.	81	88	97	94	98
Total energy use, normalised, kWh per sq. m.	90	95	103	100	104
1. of which actual heating	56	60	64	64	69
2. of which normalised heating	65	67	70	70	75
3. of which electricity and cooling	25	28	33	30	29
Total CO2 emissions for property management, CO2 in kg per sq. m.*	1.0	1.5	1.2	1.7	1.9
of which Scope 1	0.0	0.1	0.2	0.3	0.1
of which Scope 2	1.0	1.4	1.0	1.4	1.8
Total water use, m3 per sq. m.	0.26	0.29	0.27	0.28	0.24
Environmental certification, %	39%	36%	33%	29%	24%

* This list includes all CO2 emissions from property management (i.e. scopes 1 and 2). Detailed information on Castellum's CO2 emissions and complete Scope 3 emissions outside of property management can be found in the 2019 Annual Report on page 233. Total energy use is the sum of 1 and 3. Total normalised energy use is the sum of 2 and 3.

Sustainability goals and performance

Castellum's target is to achieve 100% climate neutrality in its operations by 2030.

STATUS

–7% –9% 1% water conservation per year 3) 1.5% energy efficiency enhancements per year 3) All new production and major reconstructions sustainability certified

1.0% 1.4% Bring ecosystem services to major projects <2% short-term sick leave <3% long-term sick leave 30 SEP 2020 ONGOING TARGETS STATUS 30 SEP 2020 ONGOING TARGETS STATUS

of Conduct

1) Measured annually

2) To be reported for the first time at the end of 2021

3) In the "like-for-like" portfolio 4) Project on hold due to coronavirus

2%4)

Condensed consolidated statement of comprehensive income

MSEK		2020 Jul–Sep	2019 Jul–Sep	2020 Jan–Sep	2019 Jan–Sep	Rolling 4 quarters Oct 2019–Sep 2020	2019 Jan–Dec
Rental income		1,360	1,329	4,075	3,934	5,406	5,265
Service income		106	115	327	338	441	452
Co-working income		23	28	86	71	119	104
Income	Note 2	1,489	1,472	4,488	4,343	5,966	5,821
Operating costs	Note 3	–142	–147	–472	–519	–664	–711
Maintenance expenses	Note 3	–29	–37	–91	–110	–138	–157
Property tax	Note 3	–95	–124	–278	–275	–370	–367
Co-working expenses	Note 3	–21	–28	–89	–70	–118	–99
Letting and property administration expenses	Note 3	–80	–78	–266	–267	–373	–374
Net operating income		1,122	1,058	3,292	3,102	4,303	4,113
Central administrative expenses	Note 3	–30	–29	–105	–119	–149	–163
Acquisition costs		—	—	—	–9	—	–9
Net financing costs	Note 4
Net interest costs		–187	–186	–581	–587	–776	–782
Letting cost/Site leasehold fee		–6	–6	–18	–16	–24	–22
Income from property management incl. acqui sition costs*	Note 1	899	837	2,588	2,371	3,354	3,137
Income from property management		899	837	2,588	2,380	3,354	3,146
Goodwill, impairment		—	—	—	–179	—	–179
Changes in value	Note 5
Properties		398	623	816	2,505	2,229	3,918
Derivatives		–3	–120	–212	–417	94	–111
Income before tax		1,294	1,340	3,192	4,280	5,677	6,765
Current tax	Note 6	–58	–106	–140	–213	–92	–165
Deferred tax	Note 6	–221	–183	–503	–430	–1,023	–950
Net income for the period/year		1,015	1,051	2,549	3,637	4,562	5,650
Other comprehensive income
Items that can be reclassified to net income for the period
Translation difference of currencies, etc.		31	110	59	266	–115	92
Changes in values on derivatives, currency hedge		–13	–113	–79	–210	84	–47
Comprehensive income for the period/year**		1,033	1,048	2,529	3,693	4,531	5,695
Average number of shares, thousand		273,031	273,201	273,115	273,201	273,136	273,201
Income, SEK/share		3.72	3.85	9.33	13.31	16.70	20.68

* For calculation, refer to financial key metrics, page 23.

** Net income and comprehensive income for the period/year is entirely assignable to the Parent Company's shareholders.

Accounting policies can be found on page 25.

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

Performance analysis, January – September 2020

NOTE 1 Income from property management

Income from property management (i.e. net income excluding changes in value and tax) for the period January–September 2020 amounted to MSEK 2,588 (2,380), equivalent to SEK 9.48 (8.71) per share – an increase of 9%. Income from property management, rolling four quarters, amounted to MSEK 3,354 (3,113), equivalent to SEK 12.28 per share (11.39) – an increase of 8%.

SEGMENT INFORMATION
	Income		Income from property management
MSEK	2020 Jan–Sep	2019 Jan–Sep	2020 Jan–Sep	2019 Jan–Sep
Central	1,192	1,113	697	606
West	1,027	982	605	566
Öresund	945	878	569	505
Stockholm–North	1,204	1,253	777	766
Finland	34	46	9	19
Co-working	86	71	–7	–1
Total	4,488	4,343	2,650	2,461

The difference between the income from property management of MSEK 2,650 (2,461) above and the Group's reported income before tax of MSEK 3,192 (4,280) consists of unallocated income from property management of MSEK –62 (–81), impairment of goodwill of MSEK 0 (179), change in values on properties of MSEK 816 (2,505) and change in values on derivatives of MSEK –212 (–417).

NOTE 2 Income

The Group's income totalled MSEK 4,488 (4,343). Rental income includes discounts of MSEK 88 (72) as well a lump sum of MSEK 15 (14) as a result of early termination of leases. Castellum granted discounts of MSEK 14 in accordance with the government's rent support package linked to COVID-19, whereby Castellum takes 50% of the cost. Accordingly, for reasons of simplification, rental income was reduced by a net amount of MSEK 7. Furthermore, MSEK 20 in non-recurring income was received, which consists of a number of insurance cases that were settled during the second quarter.

The average economic occupancy rate was 93.4% (94.1), where the calculation has been changed to only take into account vacancies unlike previously, where discounts were also included. The comparative figures have been restated. Moreover, the co-working company United Spaces generated income of MSEK 86 (71) in the period.

INCOME FROM PROPERTY MANAGEMENT PER SHARE NET LETTINGS

DEVELOPMENT OF INCOME
MSEK	2020 Jan–Sep	2019 Jan–Sep	Change, %
Like-for-like portfolio	3,990	3,901	2.3%
Development properties	212	148
Transactions	200	223
Co-working	86	71

Income 4,488 4,343 3.3%

Rental income in the like-for-like portfolio increased 2.3%, which was due to higher rents, up 3.0%, but also to higher vacancies and discounts of 0.7%. Gross lettings (i.e. the annual value of total lettings) during the period was MSEK 465 (265), of which MSEK 224 (34) pertained to lettings in conjunction with new construction, extensions and reconstructions. Notices of termination amounted to MSEK 274 (303), of which bankruptcies were MSEK 3 (7) and MSEK 14 (14) were notices of termination with more than 18 months left of contract. Accordingly, net lettings for the period totalled MSEK 191 (–38). The time difference between reported net lettings and the income effect thereof is estimated to be between 9–18 months in investment properties and 12–24 months for investments in new construction, extensions and reconstructions. Notices of termination in the third quarter included a major agreement with an annual value of MSEK 56, with surrender of the property in 12 months.

NET LETTINGS JAN–SEP 2020
			Region
MSEK	Central	West	Öre- sund	Sthlm	North		Fin- land Total
NEW LETTINGS
Existing prop.	79	55	41	55	8	3	241
Investments	59	0	143	22	0	0	224
Total	138	55	184	77	8	3	465
NOTICES OF TERMINATION
Existing prop.	–60	–45	–102	–62	–2	—	–271
Bankruptcies	–1	0	–1	–1	0	0	–3
Total	–61	–45	–103	–63	–2		0 –274
Net lettings	77	10	81	14	6	3	191
NOI Q3 2019	–6	–40	19	0	1	–12	–38

NOTE 3 Costs

Direct property costs totalled MSEK 841 (904), corresponding to SEK 265/sq. m. (286). Property costs for the like-for-like portfolio decreased 6.5%. In addition, expenses for co-working totalled MSEK 89 (70).

Property administration totalled MSEK 266 (267), corresponding to SEK 85/sq. m. (88).

Central administrative expenses were MSEK 105 (119). Central administrative expenses also included costs related to the profit and share price-related incentive plan for members of Executive Management of MSEK 10 (6).

DEVELOPMENT OF PROPERTY COSTS

MSEK	2020 Jan–Sep	2019 Jan–Sep	Change, %
Like-for-like portfolio	753	805	–6.5%
Development properties	45	43
Transactions	43	56
Direct property costs	841	904	–7.0%
Co-working	89	70
Property administration	266	267
Central administration	105	119
Total costs	1,301	1,360	–4.3%

Consumption for heating during the period has been calculated to 81% (87) of a normal year according to the degree day statistics.

PROPERTY COSTS
SEK/sq. m.	Office	Public sector properties	Ware house/ logistics	Light industry	Retail	Total
Operating costs	196	174	91	95	125	149
Maintenance expenses	40	31	15	23	28	29
Property tax	134	107	28	27	77	87
Total prop. costs	370	312	134	145	230	265
Letting & prop. admin.						85
Total	370	312	134	145	230	350
NOI Q3 2019	393	328	148	163	252	374

NOTE 4 Net financing costs

Net interest was MSEK –581 (–587). The average interest rate over the period was 2.0% (2.0). Net interest was positively affected by approximately MSEK 18 due to the 0.06 percentage point decrease in the average interest rate. Further, interest costs for leases amounted to MSEK 18 (16), of which site leasehold fees were MSEK 14 (14).

NOTE 5 Changes in value

Interest in property investments (which had adopted a "wait and see" approach in previous quarters) and access to capital strengthened during the quarter, which at present has resulted in a stable and strong property market despite it still being impossible to fully overview the effects of the pandemic. A certain amount of differentiation is occurring among different property types in which secure cash flows are especially of interest. Castellum recognised an unrealised change in value of MSEK 695 (2,830), of which MSEK 373 pertained to project gains. Moreover, sales of

MSEK 121 (–325) were recognised, which comprised an earnout from the sale of the Archimedes property in Stockholm in 2018. The detailed development plan has now entered force and the transaction has been settled in full.

The value of the derivatives changed by MSEK –212 (–417), mainly due to changes in long-term market interest rates.

CHANGE IN VALUES ON PROPERTIES
MSEK	2020 Jan–Sep	2019 Jan–Sep
Cash flow	105	574
Project gain	373	406
Required yield	176	1,645
Acquisitions	41	205
Unrealised change in value	695	2,830
NOI %	0.7%	3.2%
Sales	121	–325
Total	816	2,505
NOI %	0.8%	2.8%

NOTE 6 Tax

Recognised tax totalled MSEK 643 (643), of which MSEK 140 (213) is current tax. Current tax is calculated based on a nominal tax rate of 21.4%, while deferred tax is based on the lower tax rate of 20.6% that applies from 2021. Due to the possibility to deduct depreciation and reconstruction on property for tax purposes, and to utilise 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 utilised in Castellum as a whole.

Remaining tax loss carry forwards can be estimated at MSEK 308 (1,032). Furthermore, there are untaxed reserves of MSEK 677 (149). Fair values for the properties exceed their fiscal value by MSEK 58,463 (53,824) of which MSEK 6,816 (6,181) relates to the acquisition of properties accounted for on the acquisition date as asset acquisitions. A full nominal tax of 20.6% of the net from these items less the deferred tax attributable to the asset acquisitions – that is, MSEK 10,718 (9,633) – is recognised as a deferred tax liability.

Castellum has no ongoing tax disputes.

TAX CALCULATION 30 SEP 2020

MSEK	Basis current tax	Basis deferred tax
Income from property management	2,588
Non-deductible interest	77
Deductions for tax purposes
depreciation	–866	866
reconstructions	–231	231
Other tax adjustments	–370	102
Taxable income from property management	1,198	1,199
current tax 21.4%, if tax loss carry forwards are not utilised	256
Sales of properties	—	—
Change in values on properties	—	695
Taxable income before tax loss carry forwards	1,198	1,894
Tax loss carry forwards, opening balance	–854	854
Tax loss carry forwards, closing balance	308	–308
Taxable income	652	2,440
Tax according to the income statement for the period	–140	–503

Note 6 cont.

NET DEFERRED TAX LIABILITY 30 SEP 2020
MSEK	Basis	Nominal tax liability	Real tax liability
Tax loss carry forwards	308	66	66
Untaxed reserves	–677	–145	–145
Properties	–58,463	–12,043	–2,106
Total	–58,832	–12,122	–2,185
Properties, asset acquisitions	6,816	1,404	—
In the balance sheet	–52,016	–10,718	—

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

The actual net deferred tax liability has been estimated at 4% based on a discount rate of 3%. Further, it has been assumed that tax loss carry forwards are realised in one year with a nominal tax of 21.4%, that the properties are realised in 50 years and where the entire portfolio is sold indirectly in corporate wrappers (the previous assumption was 67%), and where the buyer's tax discount is 7%, which is in line with transactions made by Castellum in recent years. Castellum's changed assumptions (compared with the close of the previous year) for the share to be sold indirectly versus directly is in line with EPRA's new guidelines for the market valuation of deferred tax liabilities.

WORKING OUT OUTDOORS

As a consequence of the coronavirus pandemic, more people than ever are turning to leisure activities outdoors. Castellum's new WorkOUT concept gives our customers the possibility of working outdoors as well. Using outdoor offices promotes a number of the positive effects that being outdoors has on people.

With the outdoor office planned for the roof of Källeruds Park in Örebro, the sky will be the limit for your creativity. It is an airy complement to normal workplaces, with bookable meeting rooms that have no ceilings or walls but full access to electricity and the Internet. Perfect for a "walk & talk" between meetings while enjoying the view.

Condensed Consolidated Balance Sheet

MSEK		30 Sep 2020	30 Sep 2019	31 Dec 2019
ASSETS
Investment properties	Note 7	98,076	92,719	95,168
Goodwill	Note 8	1,673	1,691	1,691
Leases, right-of-use	Note 9	898	868	846
Other fixed assets		182	176	179
Current receivables		1,078	1,103	928
Cash and cash equivalents		198	217	173
Total assets		102,105	96,774	98,985
EQUITY AND LIABILITIES
Equity		44,502	41,775	43,777
Deferred tax liability	Note 6	10,718	9,633	10,153
Other provisions		3	6	5
Interest-bearing liabilities	Note 10	42,486	40,637	40,826
Derivatives	Note 11	871	803	715
Lease liability	Note 9	898	868	846
Non-interest bearing liabilities		2,627	3,052	2,663
Total equity and liabilities		102,105	96,774	98,985
Pledged assets (pledged mortgages)		20,381	20,949	20,903
Pledged assets (chattel mortgages)		—	—	—
Contingent liabilities		—	—	—

Condensed Changes in Equity

MSEK	Number of shares outstanding, thousand	Share capital	Other capital contribution	Currency translation reserve	Currency hedge reserve	Non controlling interest	Retained earnings	Total equity
Equity 31 Dec 2018	273,201	137	12,434	274	–269	–2	27,175	39,749
Dividend, Mar and Sep 2019 (SEK 6.10/share)	—	—	—	—	—	—	–1,667	–1,667
Net income, Jan–Sep 2019	—	—	—	—	—	—	3,637	3,637
Other comprehensive income, Jan–Sep 2019	—	—	—	266	–210	—	—	56
Equity 30 Sep 2019	273,201	137	12,434	540	–479	–2	29,145	41,775
Net income, Oct–Dec 2019	—	—	—	—	—	—	2,013	2,013
Other comprehensive income, Oct–Dec 2019	—	—	—	–174	163	—	—	–11
Equity, 31 Dec 2019	273,201	137	12,434	366	–316	–2	31,158	43,777
Dividend, Mar and Sep 2020 (SEK 6.50/share)	—	—	—	—	—	—	–1,776	–1,776
Repurchase of own shares	—	—	—	—	—	—	–28	–28
Net income, Jan–Sep 2020	—	—	—	—	—	—	2,549	2,549
Other comprehensive income, Jan–Sep 2020	—	—	—	59	–79	—	—	–20
Equity, 30 Sep 2020	273,201	137	12,434	425	–395	–2	31,903	44,502

Balance sheet, 30 September 2020

NOTE 7 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 48% office, 23% public sector properties, 17% warehouse/logistics, 7% retail and 2% light industry. The properties' locations vary from city centre locations to well-situated business districts with good means of communication and services. The remaining 3% consists of projects and undeveloped land.

Castellum owns approximately 700,000 square meters of unutilised building rights and ongoing larger projects with remaining investments of approximately SEK 3.3 billion.

Investments

During the period, investments totalling MSEK 1,996 (4,850) were carried out, of which MSEK 317 (2,789) were acquisitions and MSEK 1,800 (2,061) new construction, extensions and reconstructions. After receipt of the earnout of MSEK 121 (4,109), net investments amounted to MSEK 1,996 (741).

CHANGES IN THE PROPERTY PORTFOLIO
	Fair value, MSEK	Number
Property portfolio on 1 January 2020	95,168	632
+ Acquisitions	317	4
+ New construction, extensions and reconstructions	1,800	1
– Sales	—	—
+/– Unrealised changes in value	695	—
+/– Currency translation	96	—
Property portfolio on 30 Sep 2020	98,076	637

Property value

Internal valuations

Castellum assesses property values through internal valuations, as of previous year, corresponding to level 3 in IFRS 13.

INVESTMENTS PER REGION

The valuations are based on a 10-year cash flow model with 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%.

Ongoing projects 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 approximately SEK 1,500 (1,500) per square metre. 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. Historically, the difference between the internal and external valuations has been small.

Based on these internal valuations, property value at the end of the period was assessed at MSEK 98,076 (92,719), corresponding to SEK 22,836 (21,971) per square metre.

Average valuation yield

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

AVERAGE VALUATION YIELD
(excl. projects/land and building rights)	MSEK
Net operating income, properties	3,549
+ Real occupancy rate, 94% at the lowest	210
– Normalised property costs	–18
– Property admin, SEK 30/sq. m.	–98
Normalised net operating income (9 months)	3,643
Valuation (excl. building rights of MSEK 556)	94,517
Average valuation yield	5.1%

Valuation yield per category	30 Sep 2020	31 Dec 2019
Offices	5.0%	5.0%
Public sector properties	4.8%	4.8%
Warehouse/logistics	5.6%	5.6%
Retail	5.8%	5.8%
Light industry	6.6%	6.6%
Total	5.1%	5.1%

PROPERTY-RELATED KEY METRICS
	2020 Jan–Sep	2019 Jan–Sep	2019 Jan–Dec
Rental value, SEK/sq. m.	1,527	1,493	1,495
Economic occupancy rate	93.4%	94.1%	93.8%
Property costs, SEK/sq. m.	350	374	384
Net operating income, SEK/sq. m.	1,051	1,014	1,001
Property value, SEK/sq. m.	22,836	21,971	22,363
Number of properties	637	631	632
Lettable area, thousand sq. m.	4,287	4,183	4,255
Average valuation yield	5.1%	5.1%	5.1%

Castellum's property portfolio

	30 Sep 2020 January–September 2020
Category	No. of proper- ties	Area, thousand sq. m.	Property value, MSEK	NOI SEK/sq. m.	Rental value, MSEK	NOI SEK/sq. m.	Occupancy rate	Income, MSEK	Property costs, MSEK	NOI SEK/sq. m.	Net operat- ing income, MSEK
OFFICE
Stockholm	29	283	12,441	43,946	510	2,403	89.9%	460	85	400	375
West	66	375	10,869	28,971	508	1,804	94.1%	468	89	316	379
Central	78	540	10,816	20,046	634	1,567	91.6%	572	135	334	437
Öresund	43	398	11,405	28,696	632	2,120	91.8%	566	130	436	436
North	2	5	93	18,436	6	1,593	98.7%	6	1	372	5
Finland	1	14	886	61,421	34	3,167	100.0%	34	8	721	26
Total Office	219	1,615	46,510	28,803 2,324		1,919	92.0%	2,106	448	370	1,658
PUBLIC SECTOR PROPERTIES
Stockholm	12	89	5,697	63,794	211	3,148	97.4%	200	32	481	168
West	15	110	2,184	19,840	117	1,412	92.3%	107	19	232	88
Central	31	314	8,732	27,842	419	1,782	96.7%	403	75	319	328
Öresund	9	98	3,658	37,497	167	2,280	98.8%	163	21	285	142
North	10	99	2,010	20,246	111	1,498	95.0%	105	19	254	86
Total Public sector properties	77	710	22,281	31,389	1,025	1,925	96.5%	978	166	312	812
WAREHOUSE/LOGISTICS
Stockholm	38	280	5,506	19,674	257	1,225	91.9%	232	29	138	203
West	70	628	7,724	12,292	392	832	93.9%	350	59	125	291
Central	30	165	1,489	9,032	102	822	87.7%	88	16	132	72
Öresund	32	213	2,173	10,187	137	859	94.9%	126	25	156	101
Total Warehouse/Logistics	170	1,286	16,892	13,131	888	921	92.8%	796	129	134	667
RETAIL
Stockholm	29	152	3,401	22,420	175	1,538	94.8%	164	23	199	141
West	16	61	1,212	19,863	63	1,380	97.2%	59	12	260	47
Central	21	113	1,843	16,235	111	1,298	97.2%	105	19	228	86
Öresund	11	46	810	17,802	52	1,521	89.7%	45	10	298	35
Total Retail	77	372	7,266	19,546	401	1,437	95.2%	373	64	230	309
LIGHT INDUSTRY
Stockholm	10	43	730	16,826	41	1,259	95.0%	39	7	204	32
West	16	66	697	10,558	42	847	93.1%	38	6	122	32
Central	10	29	356	12,213	23	1,072	96.8%	23	4	182	19
Öresund	4	42	341	8,108	25	793	93.9%	23	3	96	20
Total Light Industry	40	180	2,124	11,760	131	970	94.5%	123	20	145	103
Total investment properties	583	4,163	95,073	22,836 4,769		1,527	93.4%	4,376	827	265	3,549
Letting and property administration expenses									266	85	–266
Total after letting and property administration									1,093	350	3,283
Projects	34	124	2,602	—	62	—	—	34	20	—	14
Undeveloped land	20	—	401	—	—	—	—	—	—	—	—
Total	637	4,287	98,076	—	4,831	—	—	4,410	1,113	—	3,297

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 entire period. The discrepancy between the net operating income of MSEK 3,297 reported above and the net operating income of MSEK 3,292 in the income statement is explained by the MSEK 8 upward adjustment of the net operating income of on properties acquired/completed during the period, which are recalculated as if they had been owned or completed during the entire period, and MSEK -3 from the co-working company that is not included in the above table.

A more detailed description about property categories is available on page 28, Definitions.

Customers

Castellum's property 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 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 7% of income value, but this segment includes grocery stores and car dealerships. Another type of retail exposure also occurs in the warehouse/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 maturities for Castellum's portfolio appear in the table below. The relatively low proportion of contracts maturing in 2020 is primarily due to the fact that most contracts have already been renegotiated.

LEASE MATURITY STRUCTURE, 30 SEP 2020
MSEK	No. of leases	Lease value, MSEK	Percentage of value
Commercial, term
2020	162	6	0%
2021	1,921	682	12%
2022	1,318	1,104	19%
2023	1,195	1,149	20%
2024	552	654	12%
2025+	464	1,888	34%
Total commercial	5,612	5,484	97%
Residential	448	42	1%
Parking spaces and other	5,859	97	2%
Total	11,919	5,623	100%

Risk exposure, credit risk

Castellum's lease portfolio features a good risk exposure. The Group has approximately 5,600 commercial leases and 448 residential leases, and their distribution in terms of size is presented in the table below. The single largest lease as well as the single largest customer accounts for around 2% of the Group's total rental income, meaning that Castellum's exposure to single-customer credit risk is very low.

LEASE SIZE
Lease size, MSEK	No. of leases	Share	Lease value, MSEK	Share
Commercial
<0.25	2,689	23%	200	4%
0.25–0.5	934	8%	344	6%
0.5–1.0	824	7%	584	10%
1.0–3.0	777	6%	1,345	24%
<3.0	388	3%	3,011	53%
Total	5,612	47%	5,484	97%
Residential	448	4%	42	1%
Parking spaces and other	5,859	49%	97	2%
Total	11,919	100%	5,623	100%

COMMERCIAL LEASES DISTRIBUTED BY SECTOR

Castellum's portfolio is well distributed over various segments, whereby almost half consist of office buildings. Exposure to segments that are particularly affected by the coronavirus crisis is relatively low.

Castellum's project portfolio

1. Hisingen Logistics Park, Phase 2 GOTHENBURG

• COMPLETED OR FULLY/ PARTIALLY OCCUPIED New construction, logistics Investment: MSEK 337

2. Backa 20:5, Phase 2

GOTHENBURG

• ONGOING New construction, warehouse/office Investment: MSEK 82

3. Masthugget 26:1

GOTHENBURG • ONGOING New construction, office Investment: MSEK 238

4. Götaland 5

PARTIALLY OCCUPIED Reconstruction, office Investment: MSEK 87

JÖNKÖPING

5. Visionen 3 JÖNKÖPING • COMPLETED OR FULLY/

7. Sellerin 3

LUND

• ONGOING New construction, warehouse/ car dealer Investment: MSEK 88

8. Nya Domstolsverket

MALMÖ

• ONGOING New development, court Investment: SEK 1.3 billion

4 5

Moränen 3

• COMPLETED OR FULLY/ PARTIALLY OCCUPIED New construction, light industry Investment: MSEK 54

PARTIALLY OCCUPIED

Örnäs 1:17 UPPLANDS-BRO • COMPLETED OR FULLY/ PARTIALLY OCCUPIED New construction, warehouse/logistics

Investment: MSEK 208

MALMÖ

E.ON MALMÖ • ONGOING New construction, office Investment: SEK 1.3 billion

14. Verkstaden 14

VÄSTERÅS

• ONGOING New construction, office Investment: MSEK 198

15. Korsningen

ÖREBRO

ONGOING

• ONGOING New construction, office Investment: MSEK 227

COMPLETED OR FULLY/ PARTIALLY OCCUPIED (ongoing investment)

6 7

Larger investments

			Rental value	Econ.	Total inv.	Of which	Remaining
Property	Area, sq. m.		MSEK SEK/sq. m.	occup. Oct 2020	incl. land, MSEK	inv., MSEK	inv.,	MSEK Completed	Category
Sjustjärnan 1/E.ON, Malmö	31,460	78	2,775	91%	1,296	289		1,007 Q1 2023	New construction, office
Godsfinkan 1, Malmö	26,500	81	3,030	91%	1,270	367		903 Q1 2023	New development, court
Öskaret 1, Stockholm	10,841	60	5,550	67%	638	541		97 Q4 2020	Reconstruction, office
Dragarbrunn 21:1, Uppsala	14,130	45	3,150	72%	493	217		276 Q4 2021	New/reconstruction office
Götaland 5, Jönköping	9,200	23	2,500	100%	325	17		308 Q3 2022	New development, court
GreenHaus, Helsingborg	7,000	19	2,800	31%	305	133		172 Q2 2022	New construction, office
Masthugget 26:1, Gothenburg	4,185	13	3,200	10%	238	200		38 Q4 2020	New construction, office
Korsningen 1, Örebro	5,650	15	2,800	100%	227	26		201 Q2 2022	New construction, office
Verkstaden 14, Västerås	5,800	14	2,430	88%	198	51		147 Q1 2022	New construction, office
Sellerin 3, Lund	5,190	7	1,300	40%	88	59		29 Q1 2021	New construction, warehouse/car dealer
Backa 20:5, Gothenburg	4,600	7	1,500	100%	82	57		25 Q1 2021	New construction, warehouse/office
Developments completed/partly occupied
Hisingen Logistics Park, Phase 2, Gothenburg	36,700	28	750	100%	337	311		26 Q3 2020	New construction, logistics
Örnäs 1:17, Upplands-Bro	15,719	15	1,000	54%	208	197		11 Q1 2020	New construction, warehouse/logistics
Visionen 3, Jönköping	5,155	10	1,850	80%	87	67		20 Q2 2020	Reconstruction, office
Moränen 3, Malmö	3,421	5	1,350	82%	54	54		0 Q1 2020	New construction, light industry
Total developments, >MSEK 50					5,846	2,586	3,260

NOTE 8 Goodwill

In 2016, the CORHEI and Norrporten companies were acquired. Goodwill arose in connection with these acquisitions, 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 property market or a situation wherein properties included in the transaction above are divested. At the end of the period, goodwill attributable to deferred tax was MSEK 1,480 (1,480). In addition, the co-working company United Spaces was acquired in early 2019, which is why goodwill amounting to MSEK 193 (211) arose at the end of the period.

NOTE 9 Leases

IFRS 16 Leases entered force on 1 January 2019, meaning that Castellum values its leases and recognises the rightof-use as an asset with a corresponding liability. At the balance sheet date, the value of Castellum's leases was MSEK 898 (846), divided into site leasehold agreements of MSEK 483 (483) and rental agreements in United Spaces, the co-working company acquired in 2019, of MSEK 415 (363).

NOTE 10 Interest-bearing liabilities, cash and cash equivalents

Castellum must maintain a low level of financial risk, meaning a sustainable LTV ratio of less than 50% and an interest coverage ratio of at least 200%.

Interest-bearing liabilities

At the end of the period, Castellum had credit agreements totalling MSEK 59,647 (60,604), of which MSEK 47,621 (49,433) was long-term and MSEK 12,026 (11,171) was short-term. Of the utilised borrowing facilities at the end of the period, MSEK 30,700 (30,233) was long-term and MSEK 11,588 (10,420) short-term.

After deduction of cash of MSEK 198 (173), net interestbearing liabilities were MSEK 42,288 (40,653), of which MSEK 29,812 (27,512) were bonds outstanding and MSEK 5,263 (5,136) commercial paper outstanding (nominal MSEK 29,795 and MSEK 5,270 respectively).

During the period, bank credit facilities of approximately MSEK 4,400 were extended and MSEK 616 were raised with new counterparties. Castellum has also, as part of Castellum's Swedish MTN program, issued new bonds with a nominal amount of MSEK 3,800 while bonds with a nominal value of MSEK 1,025 matured.

Most of Castellum's borrowings are revolving bank credit facilities, which means great flexibility. Issued bonds and commercial paper expand the financing base, and account for the majority of the utilised borrowing facilities. At the end of the period, the fair value of liabilities essentially corresponded with the carrying amounts. Long-term bank loan commitments 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 42,288 (40,653), MSEK 7,213 (7,249) was pledged against property deeds and MSEK 35,075 (33,404) was unsecured, which means that approximately 17% (18) 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 13% (13) of the properties' value. Castellum's share of unsecured assets at the end of the period was 60% (57). Secured borrowing in relation to total assets was 7% (7).

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 showing current levels for those ratios at: 43%, 545% and 7% respectively. The average debt maturity structure for utilised borrowing facilities including extension options at year end was 3.8 years (3.8), whereas the average credit price tenor at the same point in time was 3.2 years (3.2). At the end of the period, the net debt to EBITDA ratio was 10 (10).

Castellum has an official credit rating from the credit rating agency Moody's. The rating, which is an Investment Grade rating, is Baa2 with a stable outlook. The rating is expected to result in further improvement of financial flexibility for Castellum by supporting both Castellum's relative funding cost and access to loan capital over time.

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 3.0 years (3.3). The average effective rate at 30 March 2020 was 1.80% (1.82) excluding unutilised credit agreements, and 1.94% (1.99) including unutilised credit agreements. Castellum utilises interest rate swaps to achieve the desired interest rate maturity structure. Interest rate swaps are a cost-efficient and flexible way to achieve the desired fixed interest term.

In the interest rate maturity structure, interest rate swaps 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 exposure

Castellum owns properties in Denmark and Finland with a value of MSEK 7,386 (7,247), which means that the Group is exposed to currency risk. The currency risk is primarily related to when income statements and balance sheets in foreign currencies are translated into Swedish kronor.

	CREDIT MATURITY STRUCTURE, 30 SEPTEMBER 2020
		Utilised in
Credit agreements	MSEK	Bank	MTN/ Commer- cial paper	Total	Share, %
0–1 year	12,026	2,373	9,215	11,588	27%
1–2 years	9,598	854	4,244	5,098	12%
2–3 years	8,323	1,152	3,551	4,703	11%
3–4 years	11,980	11	7,569	7,580	18%
4–5 years	7,654	11	3,242	3,253	8%
>5 years	10,066	2,812	7,254	10,066	24%
Total	59,647	7,213	35,075	42,288	100%

INTEREST RATE MATURITY, 30 SEPTEMBER 2020

Maturity date	MSEK **	Share, %	Average interest rate, %*	Average fixed interest rate term
0–1 year	17,016	40%	2.00%	0.3
1–2 years	3,749	9%	0.85%	1.5
2–3 years	1,849	4%	1.21%	2.5
3–4 years	6,254	15%	2.17%	3.3
4–5 years	1,750	4%	1.23%	4.5
5–10 years	11,670	28%	1.79%	7.3
Total	42,288	100%	1.80%	3.0

* Including credit-agreement fees and exchange rate differences for MTNs ** Calculated on the net volume of interest-bearing liabilities and derivatives

DISTRIBUTION OF INTEREST-BEARING LIABILITIES, 30 SEP 2020 SECURED CREDIT FACILITIES, 30 SEP 2020

NOTE 11 Interest rate and currency derivatives Castellum utilises interest rate swaps to achieve the desired interest rate maturity structure. 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 swaps, where changes in value not affecting the cash flow are recognised 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 comprehensive income.

To calculate the market value of derivatives, market rates for each term and, where appropriate, exchange rates as quoted in 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 30 September 2020, the market value of the interest rate swap portfolio amounted to MSEK –803 (–592) and the currency derivative portfolio to MSEK –68 (–123). All derivatives are, as for the previous year, classified at 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%	43%
Interest coverage ratio	At least 200%	At least 150%	545%
The share of secured borrowing/total assets		Not exceeding 45%	7%
Funding risk
– average debt maturity	At least 2 years		3.8 years
– proportion maturing within 1 year	No more than 30% of loans outstanding and unutilised credit agreements		12%
– average credit price tenor	At least 1.5 years		3.2 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		3.0 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	Net investments are hedged		Achieved
– transaction exposure	Handled if exceeding MSEK 25		Achieved

Condensed Consolidated Cash Flow Statement

MSEK	2020 Jul–Sep	2019 Jul–Sep	2020 Jan–Sep	2019 Jan–Sep	Rolling 12 months Oct 19–Sep 20	2019 Jan–Dec
Net operating income	1,122	1,058	3,292	3,102	4,303	4,113
Central administrative expenses	–30	-29	–105	-119	–149	–163
Reversed depreciation	41	17	71	46	89	64
Net interest paid	–205	-173	–530	-536	–755	–761
Tax paid	–5	35	–10	-39	–132	–161
Translation difference of currencies	18	-3	–20	56	–31	45
Cash flow from operating activities before change in working capital	941	905	2,698	2,510	3,325	3,137
Change in current receivables	12	–535	–153	–692	374	–165
Change in current liabilities	1	740	–54	550	–40	564
Cash flow from operating activities	954	1,110	2,491	2,368	3,659	3,536
Investments in new construction, extensions and reconstructions	–595	–588	–1,800	–2,061	–2,501	–2,762
Property acquisitions	–25	–19	–317	–2,789	–878	–3,350
Change in liabilities at acquisitions of property	–16	20	–163	153	–43	273
Sales of properties	2	52	121	4,109	150	4,138
Change in receivables at sales of properties	14	–40	3	85	79	161
Other investments	–45	–22	–62	–296	–191	–425
Cash flow from investment activities	–665	–597	–2,218	–799	–3,384	–1,965
Change in long term interest-bearing liabilities	607	356	1,554	279	1,815	540
Change in other long term liabilities	—	—	—	—	–307	–307
Change in long term receivables	–10	24	2	8	2	8
Swap termination	—	—	—	–215	—	–215
Repurchase of own shares	—	—	–28	—	–28	—
Dividend paid	–888	–833	–1,776	–1,667	–1,776	–1,667
Cash flow from financing activities	–291	–453	–248	–1,595	–294	–1,641
Cash flow for the period/year	–2	60	25	–26	–19	–70
Cash and cash equivalents opening balance	200	157	173	243	217	243
Cash and cash equivalents closing balance	198	217	198	217	198	173

Parent Company

Condensed Income statement	2020	2019 Jul–Sep	2020 Jan–Sep	2019 Jan–Sep
MSEK Income	Jul–Sep 25	21	75	61
Costs	–47	–48	–159	–155
Net financing costs	22	11	22	30
Change in values on derivatives	–14	–149	–233	–494
Income before tax	–14	–165	–295	–558
Tax	4	5	17	18
Net income for the period/year	–10	–160	–278	–540
Comprehensive income for the Parent Company
Net income for the period	–10	–160	–278	–540
Items that will be reclassified into net income
Translation difference of currencies	18	55	36	122
Unrealised change, currency hedge	–13	–82	–78	–132
Comprehensive income for the period/year	–5	–187	–320	–550

Condensed Balance sheet MSEK	30 Sep 2020	30 Sep 2019	31 Dec 2019
Participations, Group companies	20,159	19,908	20,147
Receivables, Group companies	41,025	38,152	28,777
Other assets	121	127	11,048
Cash and cash equivalents	58	52	54
Total	61,363	58,239	60,026
Equity	15,552	15,601	17,676
Derivatives	871	803	715
Interest-bearing liabilities	39,723	38,076	38,065
Interest-bearing liabilities, Group companies	4,960	3,510	3,346
Other liabilities	257	249	224
Total	61,363	58,239	60,026
Pledged assets (receivables, Group contributions)	17,174	17,364	17,343
Contingent liability (guaranteed commitments for subsidiaries)	2,202	2,559	2,538

Opportunities and risks

Opportunities and risks in the cash flow

Risk and uncertainty factors regarding cash flow from ongoing operations is mainly attributable to changes in rental levels, vacancy rates and interest rates. The sensitivity analysis below shows how much a one-percentage-point change affects cash flow.

SENSITIVITY ANALYSIS – CASH FLOW Effect on income, next 12 months
	Effect on income, MSEK	Probable scenario
	±1% (points)	Boom	Recession
Rental level/index	+59/–59	+	—
Vacancies	+64/–64	+	—
Property costs	–15/+15	—	0
Interest cost*	–128/93	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 upward adjustment in prices, while a weaker demand has the opposite effect. In the same way, a positive development in net operating income results in an upward adjustment in prices, while a negative development has the opposite effect.

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

SENSITIVITY ANALYSIS – CHANGE IN VALUE
Properties	–20%	–10%	0%	+10%	+20%
Change in value, MSEK	–19,615	–9,808	—	9,808	19,615
Loan-to-value ratio	54%	48%	43%	39%	36%

Financial risk

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

Sustainability

Sustainability risks refer to risks directly or indirectly associated with environmental risks, climate change, a code of conduct and liability risks. For more detailed information about the above and other risks and uncertainties, visit Castellum's website or see Castellum's 2019 Annual Report, "Risk and risk management" on pages 110–121.

Corona pandemic

COVID-19 has impacted people and society as well as accelerated the transformation of, inter alia, behaviour and technical development – what were previously considered trends have become a reality. No one is unaffected. We are, however, impacted in different ways and to different degrees. The majority of the most exposed sectors are within the service sector, such as hotels, travel, restaurants, cafés and retail, which are the sectors from which Castellum has received enquiries as to liquidity relief. Here, Castellum is finalising individual agreements where the transition from quarterly to monthly payments has undoubtedly been the most common solution followed by the government's rent support. The latter starts with the property owner and allows them to offer a rent discount of up to 50% in the second quarter, and thereafter the property owner applies for compensation from the state for half of the 50%. The final outcome entails the customer paying 50% of the rent for the second quarter, the property owner giving a 25% discount and the state paying 25%.

At the time of writing, agreements to swap from quarterly to monthly payments have been agreed for quarterly rents corresponding to about MSEK 115. Moreover, MSEK 14 in discounts linked to the state support have been given, where Castellum defrays 50%, meaning that MSEK 7 has been charged to second quarter earnings.

Castellum's largest customer segment comprises government authorities and agencies, around 23% of total revenue, which is a stable and secure customer group with a long duration in our portfolio. It is also a customer group that is less dependent on the business cycle or crises, and has a need for continued expansion, which is particularly confirmed by the projects announced by Castellum in the second quarter.

The billing for the second and third quarters has been paid by 99%, and Castellum's assessment is that the third quarter will follow the same payment patterns and share, indicating a strong and stable cash flow and a good customer base. COVID-19 has slowed activity in the rental market, with consequences for primarily renegotiations but also net lettings. This slowdown, together with notices of termination that are now going into effect in late 2020 and 2021, has resulted in an assessment of flagging growth at Castellum.

Property projects

Castellum's projects are progressing as planned and a number of large projects started during the quarter for the National Courts Administration and the Swedish Police. A few reports of obstacles have been received, but these are more of a general character and currently involve no tangible delays.

Transactions and property value

The investors sentiment in the Swedish property market declined sharply on the outbreak of the coronavirus crisis, only to have clearly strengthened in the third quarter. COVID-19 has had a notable impact on society in various ways, where the service sector including some retail has had a tough time, while warehouse/logistics have fared well due, among other things, to changed consumption patterns in the form of increased e-commerce. Offices remain on "standby," where flexible workplaces advocate reducing office space, the desire to reduce travel and commuting speaks for changing office locations, while increased distance in the office, own desk, etc. indicates unchanged or increased demand for space. Castellum regards the office as a natural meeting place, which speaks to a continued great need for offices in the future. How this will ultimately turn out remains to be seen. However, it is clear that long and secure cash flows with state and government agencies as customers are more highly appreciated in these times. Though properties as an asset continue to attract great investor interest and access to capital is good, the real property assets are more polarised than ever before.

Castellum's portfolio noted a small value increase, mainly driven by project gains and stronger cash flow. Impairment has been recognised, mainly within retail, which was driven by higher yield requirements and lower cash flow. At the portfolio level, however, the yield remained unchanged.

Financing

Castellum has strong financial muscles, with unutilised credit facilities and cash and cash equivalents totalling approximately SEK 17 billion, which will easily cover all maturities in 2020 and well into 2021 while there is space to meet the needs of operations. Castellum's credit maturity structure for the remainder of 2020 consists of MSEK 3,200 in commercial paper and MSEK 200 in bonds. Castellum aims to refinance maturing commercial paper and bonds with new issues if the market allows it, but the company also has the possibility of replacing maturing debt by utilising existing unutilised bank credit facilities.

Strength

With a strong balance sheet, financial resources in place and a dedicated organisation that is able to act, Castellum is in a strong starting position for managing this crisis.

Financial Key Metrics

A number of the financial metrics presented by Castellum in the interim report are not defined in accordance with IFRS. 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, which are not defined according to IFRS. Definitions for these measures appear on page 28.

	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Rolling 12 months Oct 2019–Sep 2020	Jan–Dec 2019
Average number of shares, thousand (related to financial key metrics)	273,031	273,201	273,115	273,201	273,136	273,201
Number of shares outstanding, thousand (related to balance sheet key metrics)	273,031	273,201	273,031	273,201	273,031	273,201

Income from property management

Castellum's operations are focused on cash flow growth from ongoing management operations (i.e. growth in income 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 income from property management. Income from property management is calculated before tax paid, as well as after the theoretical tax that Castellum would have paid on income from property management had there been no loss carry forwards.

		Jul–Sep 2020	Jul–Sep 2019			Jan–Sep 2020	Jan–Sep 2019		Rolling 12 months Oct 2018–Sep 2019			Jan–Dec 2019
	MSEK	SEK/ share	MSEK	SEK/ share	MSEK	SEK/ share	MSEK	SEK/ share	MSEK	SEK/ share	MSEK	SEK/ share
Income before tax	1,294	4.74	1,340	4.90	3,192	11.69	4,280	15.67	5,677	20.78	6,765	24.76
Reversed:
Acquisition costs	—	—	—	—	—	—	9	0.03	—	—	9	0.03
Goodwill, impairment	—	—	—	—	—	—	179	0.66	—	—	179	0.66
Change in values on properties	–398	–1.46	–623	–2.28	–816		–2.99 –2,505	–9.17	–2,229	–8.16	–3,918	–14.34
Change in values on derivatives	3	0.01	120	0.44	212	0.78	417	1.52	–94	–0.34	111	0.41
= Income from property management	899	3.29	837	3.06	2,588	9.48	2,380	8.71	3,354	12.28	3,146	11.52
EPRA Earnings (Income from property management after tax)
Income from property management	899	3.29	837	3.06	2,588	9.48	2,380	8.71	3,354	12.28	3,146	11.52
Reversed: Current tax, income from prop

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 in different ways, where mainly time and turnover in the property portfolio impact on the value. Long-term net reinstatement value (EPRA NRV) 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 items as goodwill, derivatives and deferred tax liability. Net tangible assets (EPRA NTA) is the same as EPRA NRV but with the difference that goodwill that is not attributed to deferred taxes is not seen as an asset. Furthermore, the deferred tax should be based on market value according to how the company has completed property transactions in recent years. Net disposal value (EPRA NDV) is equal to equity according to the balance sheet but with adjustment for goodwill.

erty management –91 –0.33 –116 –0.42 –256 –0.94 –302 –1.10 –247 –0.91 –293 –1.08 EPRA Earnings/EPRA EPS 808 2.96 721 2.64 2,332 8.54 2,078 7.61 3,107 11.37 2,853 10.44

		30 Sep 2020		30 Sep 2019		31 Dec 2019
	MSEK	SEK/share	MSEK	SEK/share	MSEK	SEK/share
Equity according to the balance sheet	44,502	163	41,775	153	43,777	160
Reversed:
Declared, undistributed dividend	—	—	—	—	—	—
Derivatives according to the balance sheet	871	3	803	3	715	3
Goodwill attributable to deferred tax	–1,480	–5	-1,481	–5	–1,480	–5
Deferred tax according to the balance sheet	10,718	39	9,633	35	10,153	37
Net reinstatement value (EPRA NRV)	54,611	200	50,730	186	53,165	195
Deduction:
Goodwill due to acquisition of United Spaces	–193	–1	–210	–1	–211	–1
Estimated real liability, deferred tax, 4%*	–2,185	–8	–1,759	–7	–1,925	–7
Net tangible assets (EPRA NTA)	52,233	191	48,761	178	51,029	187
Reversed:
Derivatives according to above	–871	–3	–803	–3	–715	–3
Deferred tax	–8,533	–31	–7,874	–28	–8,228	–30
Net disposal value (EPRA NDV)	42,829	157	40,084	147	42,086	154

* Estimated real deferred tax liability net has been calculated to 4% based on a discount rate of 3%. Further, assessments have been made that tax loss carry forwards are realised in one year with a nominal tax of 21.4%, and that the properties are realised in 50 years and where the entire portfolio is sold indirectly in corporate wrappers where the buyers tax discount is 7%.

Financial Key Metrics, cont.

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%. Furthermore, net debt to EBITDA that expresses how many years it takes for a company to repay its interest-bearing debt, is an important financial risk metric.

					Rolling 12 months Oct 2019–
Interest coverage ratio	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Sep 2020	Jan–Dec 2019
Income from property management	899	837	2,588	2,380	3,354	3,146
Reversed:
Net interest costs	187	186	581	587	776	782
Income from property management excl. net interest	1,086	1,023	3,169	2,967	4,130	3,928
Interest coverage ratio	581%	550%	545%	505%	532%	502%
Loan-to-value ratio				30 Sep 2020	30 Sep 2019	31 Dec 2019
Interest-bearing liabilities				42,486	40,637	40,826
Cash and cash equivalents				–198	–217	–173
Net interest-bearing liabilities				42,288	40,420	40,653
Investment properties				98,076	92,719	95,168
Acquired properties not taken into possession				141	–184	–304
Divested properties still in Castellum's possession				—	79	3
Net investment properties				98,217	92,614	94,867
Loan-to-value ratio				43%	44%	43%
Net debt to EBITDA				30 Sep 2020	30 Sep 2019	31 Dec 2019
Interest-bearing liabilities				42,486	40,637	40,826
Cash and cash equivalents				–198	–217	–173
Net interest-bearing liabilities				42,288	40,420	40,653
Net operating income				3,292	3,102	4,113
Central administration expenses				–105	–119	–163
Operating income				3,187	2,983	3,950
Net debt to EBITDA				10.0	10.2	10.3

Investment

In order to achieve the overall target of 10% growth in income from property management per share, Castellum will make annual net investments of at least 5% of the property value.

					Rolling 12 months Oct 2019–
Net investments	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Sep 2020	Jan–Dec 2019
Acquisitions	25	19	317	2,789	878	3,350
New construction, extensions and reconstructions	595	588	1,800	2,061	2,501	2,762
Total investments	620	607	2,117	4,850	3,379	6,112
Net sales prices	–2	–52	–121	–4,109	–150	–4,138
Net investments	618	555	1,996	741	3,229	1,974
Proportion of the property value, %	1%	1%	2%	1%	3%	2%

Other Financial Key Metrics

	Rolling 12 months Oct 2019–
	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Sep 2020	Jan–Dec 2019
Surplus ratio	76%	73%	75%	73%	74%	72%
Interest rate level, on average	1.9%	2.0%	2.0%	2.0%	2.0%	2.0%
Net debt to EBITDA	9.7	9.8	10.0	10.2	10.2	10.3
Return on EPRA NRV	9.3%	4.1%	8.2%	9.9%	11.3%	12.6%
Return on total capital	5.8%	6.9%	5.2%	7.9%	6.4%	8.4%
Return on equity	9.3%	10.3%	7.9%	12.5%	11.2%	14.5%
Property value, SEK/share	359	339	359	339	359	348
Gross lettings	110	95	465	265	611	411
Net lettings	–9	–42	191	–38	205	–24

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 interim report.

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

Nomination Committee

At the Annual General Meeting (AGM) of Castellum AB on 19 March 2020, it was resolved that the Nomination Committee up until the 2021 AGM would consist of the Chairman of the Board as well as one member elected by each of the four largest registered or otherwise known shareholders on the last share trading day of August 2020. If one of these shareholders does not wish to elect a member, the fifth largest shareholder is consulted, and so on. Since the Chairman of the Board has contacted the largest shareholders, the Nomination Committee will consist of the following members:

Patrik Essehorn, appointed by Rutger Arnhult through his company
Vincent Fokke, appointed by Stichting Pensioenfonds ABP
Johannes Wingbord, appointed by Länsförsäkringar Fonder
Christina Tillman, appointed by Corem Property Group
Charlotte Strömberg, Chairman of the Board

The Nomination Committee all together represents approximately 26.4% of the total number of shares and votes in the company. The Nomination Committee appoints a Chairman from its members.

The task of the Nomination Committee is to submit proposals to the 2021 AGM pertaining to the chairman of the meeting, the number of Board members, the Board of Directors and its chairman, the auditor, and remuneration to Board members and the auditor. The Nomination Committee will also propose principles for appointing a Nomination Committee ahead of the 2022 AGM.

The company's shareholders are welcome to submit proposals and viewpoints to the Nomination Committee by 7 December 2020 at the latest via Castellum AB, Attn: Charlotte Strömberg, Box 2269, SE-403 14 Gothenburg, Sweden, or alternately by e-mail to [email protected].

The Nomination Committee's proposals will be published in the notice to attend the 2021 AGM and on the company's website. The Annual General Meeting for Castellum AB will be held on 25 March 2021.

Gothenburg, 15 October 2020

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 on Thursday, 15 October 2020 at 8:00 am CEST.

Events after balance sheet date

No significant events occurred after the balance sheet date.

The Castellum share

The Castellum share is listed on Nasdaq Stockholm Large Cap. At the end of the period the company had approximately 83,000 shareholders. The ten individual largest owner constellations confirmed as of 30 September 2020 are presented in the table below.

SHAREHOLDERS, 30 SEP 2020

Shareholders	Number of shares, thousand	Percentage of voting rights and capital
Rutger Arnhult	46,750	17.1%
APG Asset Management	16,914	6.2%
BlackRock	13,503	5.0%
Vanguard	9,009	3.3%
Länsförsäkringar Fonder	8,410	3.1%
Szombatfalvy-sfären	7,073	2.6%
Handelsbanken Fonder & Liv	6,760	2.5%
AMF Försäkring & Fonder	6,693	2.5%
Norges Bank	5,417	2.0%
Lannebo Fonder	4,975	1.8%
Board and Executive Manage ment Castellum	194	0.1%
Other shareholders registered in Sweden	61,929	22.7%
Shareholders registered abroad	85,405	31.3%
Total shares outstanding	273,031	100.0%
Repurchase of own shares	170
Total shares registered	273,201

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

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

Acquisitions and transfers of own shares

The 2020 AGM gave a mandate to the Board up until the next AGM to acquire and transfer shares. The acquisition may include no more than the number of shares that corresponds at any time to 10% of the total number of shares outstanding. In May 2020, 170,203 shares were repurchased at an average price of SEK 165.12. On 30 September 2020, the company's holding of treasury shares amounted to 170,203 shares corresponding to 0.06% of the number of shares registered.

Share price and share turnover

The Castellum share price as of 30 September 2020 was SEK 204.00 (210.80), equivalent to a market capitalisation of SEK 55.7 billion (57.6), calculated on the number of shares outstanding.

Since the beginning of the year a total of 235 million (213) shares were traded, equivalent to an average of 1,246,000 shares (1,132,000) per day, corresponding on an annual basis to a turnover rate of 114% (104). The share turnover is based on statistics from Nasdaq Stockholm, Cboe CXE EU, Turquoise and Cboe BXE EU.

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.

The long-term net reinstatement value (EPRA NRV) can be calculated to SEK 200 per share (186). The share price at the end of the year was thus 98% (113) of EPRA NRV.

Earnings

Income from property management adjusted for tax attributable to income from property management (EPRA EPS) amounted to SEK 11.37 (9.84) on a rolling annual basis. This results in a share price return of 5.6% (4.7) corresponding to a multiple of 18 (21). Income from property management must be adjusted for value growth in the long-term property portfolio and effective tax paid.

Earnings per share after tax amounted on rolling annual basis to SEK 20.78 per share (22.10), which from the share price gives a yield of 10.2% (10.5), corresponding to P/E ratio of 10 (10).

Dividend yield

The recent AGM approved a dividend of SEK 6.50 (6.10) corresponding to a dividend yield of 3.2% (2.9) based on the share price at the end of the period.

Total share yield

During the last 12-month period the total return on the Castellum share was 0% (37), including the dividend.

Net asset yield including long-term change in value In companies managing real assets, such as property, 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 change in value. In order to provide an accurate figure of the yield, the numerator – that is, the income – must be similarly adjusted. Therefore, the recorded income from property management 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 change in value.

DISTRIBUTION OF SHAREHOLDERS BY COUNTRY, 30 SEP 2020

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

		Sensitivity analysis
		–1% (point)	+1% (point)
Income from prop. mgmt rolling 12 months	3,354	3,354	3,354
Change in values on properties (on average 10 years)	3.2%	2.2%	4.2%
NOI MSEK	2,967	2,040	3,894
Current tax, 10%	–328	–328	–328
Earnings after tax	5,993	5,066	6,920
Earnings, SEK/share	29.30	24.77	33.84
Return on EPRA NRV	11.8%	10.0%	13.6%
Earnings/share price	10.7%	9.1%	12.4%
P/E ratio	9	11	8

EPRA KEY RATIOS
	30 Sep 2020	30 Sep 2019	31 Dec 2019
EPRA Earnings (Income from property mgmt after tax paid), MSEK	2,332	2,078	2,853
EPRA Earnings (EPS), SEK/share	8.54	7.61	10.44
EPRA NRV, MSEK	54,611	50,730	53,165
EPRA NRV, SEK/share	200	186	195
EPRA NTA, MSEK	52,233	48,761	51,029
EPRA NTA, SEK/share	191	178	187
EPRA NDV, MSEK	42,829	40,084	42,086
EPRA NDV, SEK/share	157	147	154
EPRA Vacancy rate	7%	7%	6%
EPRA Cost ratio incl. costs for vacancy	22%	25%	26%
EPRA Cost ratio excl. costs for vacancy	21%	24%	24%
EPRA Return	4.9%	5.0%	5.0%
EPRA "Topped-up" Yield	5.1%	5.1%	5.2%

GROWTH, YIELD AND FINANCIAL RISK
	1 year	3 years avg./ year	10 years avg./ year
Growth
Rental income SEK/share	3%	4%	4%
Income from property management, SEK/ share	8%	10%	8%
Net income for the year after tax SEK/share	neg.	neg.	10%
Dividend SEK/share	7%	9%	8%
EPRA NRV SEK/share	8%	12%	11%
Property portfolio SEK/share	6%	8%	8%
Change in values on properties	2.4%	4.9%	3.2%
Return
Return on EPRA NRV	11.3%	16.1%	14.8%
Return on equity	11.2%	18.2%	16.9%
Return on total capital	6.4%	9.7%	8.4%
Total return on the share (incl. dividend)
Castellum	0.4%	21.0%	14.4%
Nasdaq Stockholm (SIX Return)	18.7%	10.7%	11.5%
Real Estate Index Sweden (EPRA)	–1.0%	19.0%	16.4%
Real Estate Index Europe (EPRA)	–12.5%	0.6%	7.8%
Real Estate Index Eurozone (EPRA)	–13.0%	–0.6%	7.0%
Real Estate Index Great Britain (EPRA)	–16.9%	–3.1%	6.5%
Financial risk
Loan-to-value ratio	43%	44%	49%
Interest coverage ratio	532%	481%	370%

THE SHARE'S DIVIDEND YIELD

SHARE PRICE/NET ASSET VALUE

YIELD EARNINGS PER SHARE

THE CASTELLUM SHARE'S PRICE TREND AND TURNOVER SINCE THE IPO, 23 MAY 1997 UNTIL 30 SEPTEMBER 2020

Definitions

SHARE-RELATED KEY METRICS

Dividend yield

Dividend as a percentage of the share price at the end of the period.

Total return per share

Share price development with addition of the dividends during the period as if reinvested in shares on the day shares traded ex-dividend.

Number of shares

Registered number of shares – the number of shares registered at a given point in time. Number of shares outstanding – the number of shares registered with a deduction for the company's own repurchased shares at any given point in time. Average number of shares – the weighted average number of shares outstanding during a given period.

Data per share

In calculating income and cash flow per share the average number of shares has been used, whereas in calculating assets, equity and net asset value per share the number of shares outstanding has been used.

EPRA EPS – Earnings Per Share

Income from property management adjusted for nominal tax attributable to income from property management, divided by the average number of shares. Taxable income from property management means income from property management less deductions for tax purposes of depreciation and reconstruction.

EPRA NRV – Net Reinstatement Value

Equity as recognised in the balance sheet, adjusted for interest rate swaps, goodwill relating to deferred tax, and deferred tax in its entirety.

EPRA NTA – Net Tangible Assets

Equity as recognised in the balance sheet following add-back of derivatives and goodwill, adjusted for actual deferred tax instead of nominal deferred tax.

EPRA NDV – Net Disposal Value

Equity as recognised in the balance sheet, adjusted for goodwill that does not constitute deferred tax.

Dividend payout ratio

Dividend as a percentage of income from property management.

PROPERTY-RELATED KEY METRICS

Economic occupancy rate

Rental income accounted for during the period, less discounts, 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.

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.

Property costs

This item includes both direct property costs, such as operating expenses, maintenance, site leasehold fees and property tax, as well as indirect costs for letting and property administration.

Income from property management

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

Rental income

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

Rental value

Rental income plus estimated market rent for vacant premises.

SEK per square metre

Property-related key metrics, 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 metrics have been recalculated on an annual basis, disregarding seasonal variations normally occurring in operations.

Surplus ratio

Net operating income as a percentage of rental income.

FINANCIAL KEY METRICS

Return on EPRA NRV

Net income after tax with reversed change in values on derivatives and deferred tax as a percentage of initial EPRA NRV. In the interim accounts the return has been recalculated on an annual basis, disregarding seasonal variations normally occurring in operations.

Return on equity

Net 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 financing costs and changes in values 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.

Loan-to-value ratio

Interest-bearing liabilities after deduction for cash and cash equivalents 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.

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 costs.

Net debt to EBITDA

Interest-bearing liabilities after deduction for cash and cash equivalents in relation to net operating income less central administrative expenses.

About Castellum

Castellum is one of the largest listed property companies in Sweden with a property value of SEK 98 billion. We are located in 17 growth regions in Sweden, as well as Copenhagen and Helsinki. 250,000 people go to work every day in our properties. We develop flexible workplaces and smart logistics solutions with a lettable area of 4.3 million square metres. One of our sustainability goals is to become entirely climate neutral by 2030. Castellum is the only Nordic property and construction company elected to the Dow Jones Sustainability Index (DJSI). The Castellum share is listed on Nasdaq Stockholm Large Cap.

CASTELLUM INTERIM REPORT JANUARY–SEPTEMBER 2020

Beyond expectations. www.castellum.se

Financial calendar

Year-end report 2020 22 January 2021 Annual Report 2020 Week 6, 2021 AGM 2021 25 March 2021 Interim report January–March 2021 21 April 2021 Half-year report January–June 2021 15 July 2021 Interim report January–September 2021 19 October 2021

www.castellum.se

Visit Castellum's website to download and/or subscribe to Castellum's press releases and financial reports. For further information please contact Henrik Saxborn, CEO of Castellum AB, phone +46 31 60 74 50 or Ulrika Danielsson, CFO of Castellum AB, phone +46 706 47 12 61.

Castellum AB (publ) • Box 2269, SE-403 14 Gothenburg, Sweden • Visiting address: Östra Hamngatan 16 Phone: +46 31 60 74 00 • E-mail: [email protected] • www.castellum.se Domicile: Gothenburg • Corp. ID No.: 556475-5550

AI assistant

Castellum — Interim / Quarterly Report 2020

2900_10-q_2020-10-15_af2c5954-13fc-486e-962b-8d5c49347a91.pdf

Strong period with a 9% growth of income from property management

Important events during the quarter

On stable ground

Healthy risk spread in the portfolio

The keyword is flexibility

Slowdown going forward

"Our diversified portfolio composition provides us with growth and stability."

Market comments

Swedish, Danish and Finnish economies

Rental market

Property market

Interest and credit markets

Castellum's agenda for the sustainable city

Events during the quarter

Energy, carbon emissions and water, 2016–2020

Sustainability goals and performance

Condensed consolidated statement of comprehensive income

Performance analysis, January – September 2020

NOTE 1 Income from property management

NOTE 2 Income

INCOME FROM PROPERTY MANAGEMENT PER SHARE NET LETTINGS

NOTE 3 Costs

DEVELOPMENT OF PROPERTY COSTS

NOTE 4 Net financing costs

NOTE 5 Changes in value

NOTE 6 Tax

TAX CALCULATION 30 SEP 2020

WORKING OUT OUTDOORS

Condensed Consolidated Balance Sheet

Condensed Changes in Equity

Balance sheet, 30 September 2020

NOTE 7 Property portfolio and property value

Investment properties

Investments

Property value

INVESTMENTS PER REGION

Average valuation yield

Castellum's property portfolio

Customers

Lease maturity structure

Risk exposure, credit risk

COMMERCIAL LEASES DISTRIBUTED BY SECTOR

Castellum's project portfolio

1. Hisingen Logistics Park, Phase 2 GOTHENBURG

2. Backa 20:5, Phase 2

GOTHENBURG

3. Masthugget 26:1

4. Götaland 5

5. Visionen 3 JÖNKÖPING • COMPLETED OR FULLY/

7. Sellerin 3

LUND

8. Nya Domstolsverket

MALMÖ

14. Verkstaden 14

VÄSTERÅS

15. Korsningen

ÖREBRO

Larger investments

Larger investments

NOTE 8 Goodwill

NOTE 9 Leases

NOTE 10 Interest-bearing liabilities, cash and cash equivalents

Interest-bearing liabilities

Interest rate maturity structure

Currency exposure

INTEREST RATE MATURITY, 30 SEPTEMBER 2020

DISTRIBUTION OF INTEREST-BEARING LIABILITIES, 30 SEP 2020 SECURED CREDIT FACILITIES, 30 SEP 2020

Condensed Consolidated Cash Flow Statement

Parent Company

Opportunities and risks

Opportunities and risks in the cash flow

Opportunities and risks in property values

Financial risk

Sustainability

Corona pandemic

Property projects

Transactions and property value

Castellum Interim / Quarterly Report 2020