Castellum — Interim / Quarterly Report 2020

Jan 22, 2021

YEAR-END REPORT 2020

Growth in income from property management of 7% and a proposed dividend increase for the 23rd consecutive year

Important events during the quarter

Castellum has thus far managed the extreme changes in its business environment caused by the coronavirus pandemic in an effective manner. The company is continuing to monitor developments closely and will address the consequences of further changes with humility.

During the quarter, the Board of Directors of Castellum announced its intention to present a share exchange and cash offer to the shareholders of Entra for the purpose of combining the two companies.

Through its acquisition of the Finnish property company Lindström Invest, Castellum gained ownership of a portfolio of five office properties in Helsinki. The investment totalled MEUR 150.

During the quarter, Castellum sold properties in the university district of Halmstad. The net sale price totalled MSEK 729 less deferred tax and overheads of approximately MSEK 14.

Castellum further strengthened its position in Helsinki through the acquisition of a strategically located office property in the Sörnäinen district. The investment totalled MEUR 24.

During the quarter, the company strengthened its presence in the Slakthusområdet district in Stockholm through the acquisition of the Sandhagen 9 site leasehold. The investment totalled MSEK 296.

Castellum signed a 25-year lease with the Swedish Migration Agency with an average total annual rental value of approximately MSEK 24.

During the quarter, Castellum signed two agreements for the sale of a property portfolio comprising a total of 214 mainly warehouse and logistics properties for SEK 18.1 billion to Blackstone. In an initial tranche, 39 properties were sold for SEK 5 billion, while the remainder of the portfolio will be sold contingent on the successful acquisition of Entra. The sales price exceeds book value per as of September 30 by 20%.

During the quarter, the City of Stockholm approved the construction of a new 20,000-square metre office property in Hagastaden. The total investment volume is estimated at approximately SEK 1.7 billion, of which land acquisition is deemed to account for MSEK 650.

• Income for 2020 totalled MSEK 6,004 (5,821 for the year-earlier period).
• Income from property management amounted to MSEK 3,380 (3,146), corresponding to SEK 12.35 (11.52) per share, an increase of 7%.
• Changes in value on properties amounted to MSEK 3,863 (3,918) and on derivatives to MSEK –120 (–111).
• Net income for the year after tax amounted to MSEK 5,615 (5,650), corresponding to SEK 20.52 (20.68) per share.
• Long-term net reinstatement value (EPRA NRV) amounted to SEK 214 per share (195), an increase of 10%.
• Net lettings for the period amounted to MSEK 239 (–24).
• Net investments amounted to MSEK 4,267 (1,974) of which MSEK 2,646 (3,350) pertained to acquisitions, MSEK 2,512 (2,762) to new construction, extensions and reconstructions, and MSEK 891 (4,138) to sales.
• For the 23rd consecutive year, the Board proposes a raised dividend of SEK 6.90 (6.50) per share, corresponding to an increase of 6%, to be distributed on two occasions and in equal amounts of SEK 3.45 each.

KEY METRICS

		2020 Oct–Dec 2019 Oct–Dec 2020 Jan–Dec		2019 Jan–Dec
Income, MSEK	1,516	1,478	6,004	5,821
Net operating income (NOI), MSEK	1,043	1,011	4,335	4,113
Income from property management, MSEK	792	766	3,380	3,146
NOI SEK/share	2.88	2.80	12.35	11.52
NOI growth	+3%	+4%	+7%	+7%
Net income after tax, MSEK	3,066	2,013	5,615	5,650
Net investment, MSEK	2,271	1,233	4,267	1,974
Net lettings, MSEK	48	14	239	-24
Loan-to-value ratio	44%	43%	44%	43%
Interest coverage ratio	486%	512%	530%	502%
Dividend, SEK/share (2020 proposed)	—	—	6.90	6.50
Net reinstatement value (EPRA NRV), SEK/share	214	195	214	195
Net tangible assets (EPRA NTA), SEK/share	205	187	205	187
Net disposal value (EPRA NDV), SEK/share	168	154	168	154

Front page: With the acquisition of the Finnish property company Lindström Invest, Castellum has acquired a property portfolio in Helsinki. All of the properties are concentrated in Kalasatama, a former port area that the City of Helsinki is now developing into a district for 25,000 new residents and 10,000 new workplaces.

Major transactions demonstrate values

An acquisition of the Norwegian property company Entra, if the offer is successful, will be Castellum's largest transaction ever and of tremendous interest for Castellum's owners, since Entra and Castellum together will create such a dominant force in the Nordic region. It would be a natural choice for international investors looking for exposure to "Nordic Prime" in the property sector. The combination of these two companies provides a solid platform for creating continued shareholder value – via active property management and a strong emphasis on a shift in the portfolio, primarily through project development, while transaction and related synergy gains will also generate increased income from property management and net asset value. The transaction is described in more detail on the following pages. Let me describe why our offer, for many reasons, is better for Entra's shareholders than the competing offer: Castellum's future portfolio strategy is a much closer match with Entra's core culture. Moreover, the transaction will provide Entra's owners with a share in the future synergy gains, income from property management and growth in value. Taking into account the synergies, our offer is worth in excess of NOK 200 per Entra share. To a significant extent (almost 30% in the event of full acceptance), Entra's shareholders will become owners of the Nordic region's largest listed commercial property company.

But we also have several other major transactions that have been concluded or are in the pipeline:

The Lindström Group in Helsinki was recently acquired for MEUR 150, of which MEUR 81 via a share issue in kind. Lindström's attractively located properties create a critical mass in Helsinki and provide continued project and development opportunities.

The first tranche of a two-part transaction with Blackstone involves the sale of a mixed portfolio with mostly older logistics properties for SEK 5 billion. In the second tranche, Castellum has the possibility of selling a portfolio for an additional SEK 13.1 billion, conditional on completion of the offer for Entra, with the same quality as the first portfolio. Even if the offer for Entra is not completed, this sale remains a possibility depending on how we view the situation.

These transactions demonstrate the great "hidden" values in our portfolio. "Hidden" in this sense means that the price level is 20% higher than the valuation as of 30 September 2020, corresponding to SEK 3.1 billion before transaction costs and deferred tax of approximately SEK 0.9 billion. The net amount of SEK 2.2 billion corresponds to an increase of SEK 8 per share in net asset value, of which approximately SEK 1.6 billion is included in the changes in value in the last quarter.

The best is yet to come

More importantly, it should be emphasised that we will retain the most attractive and expansive parts of our logistics portfolio:

Hisingen Logistics Park, Castellum Säve, and Brunna, located north of Stockholm. Currently, the value of the remaining property management portfolio in this segment is approximately SEK 5 billion, and the total investment plan for the next few years is just over SEK 10 billion. Moreover, a number of logistics properties for development in the Öresund region were recently added to this portfolio. Within a few years, our logistics portfolio should be just as extensive as it was prior to the divestments, but will be of a much more modern type. New negotiations are under way. Project investment in logistics is extremely profitable if the market can be offered solutions that are tailored to today's requirements and needs.

Strong earnings in difficult times

In light of the coronavirus pandemic, we can state that to date, Castellum has managed this major challenge very well. Some 99% of billing for the year has been collected. Just over 290 contracts with quarterly rent of MSEK 125 have been converted to monthly payments, and rent reductions in the form of discounts total MSEK 14, of which state support covers 50%. We had a very small number of bankruptcies, MSEK 9 (3), and limited rental losses of MSEK 19 (13).

Income from property management rose 7% to MSEK 3,380, or 12.35 per share, which can be considered very strong under the prevailing conditions. During the final quarter, the increase was 3%.

The trend for net lettings was unexpectedly positive during the final quarter of the year, where figures for lettings, notices of termination and bankruptcies were better than in the year-earlier period.

Net asset value increased from SEK 195 per share to SEK 214 per share over the year, at the same time as a dividend of SEK 6.50 per share was paid.

The loan-to-value ratio increased to 44.2% (42.7), but includes SEK 2.8 billion in acquired Entra shares. This will fall markedly to approximately 39% if the offer to Entra is not completed. If we succeed with the offer, the loan-to-value ratio will be approximately 41% including the already secured financing of this transaction.

Regardless, Castellum's financial position after all these transactions will probably be so strong that some form of extra transfer to the shareholders will be considered.

Projects yield growth

Major transactions or not, we are also witnessing an exciting development of our existing portfolio.

Castellum has large, fully leased, ongoing projects that will produce a good yield starting next year.

At the end of 2020, Castellum had major ongoing projects of SEK 4.7 billion, of which projects for SEK 3.7 billion were started during the year, with a remaining investment volume of SEK 3.1 billion. In addition, Castellum has a number of pipeline projects, which will entail additional investment volume.

"In 2020, we proved that we can continue to grow under difficult circumstances."

2021 difficult to predict

As we already know, Castellum's dividend is linked to the trend in income from property management. This would indicate that last year's increase to the dividend for the 22nd consecutive year will be followed in March by the 23rd.

Considering the uncertainty around the major transactions and the long-term effects of the pandemic, it is difficult – if not impossible – to provide any guidance for earnings for the current year. But I think that in 2020, we proved that we can continue to grow under difficult circumstances. Castellum has a very strong base for even faster growth over the next few years when our major ongoing and fully leased projects start to generate a return.

Henrik Saxborn CEO

Brunna is a logistics hub that is attracting an increasing number of companies in the Stockholm region. Castellum owns just over 180,000 square metres of developed land, and land eligible for development, divided among six properties in this modern and rapidly growing business park.

Proposed combination of Castellum and Entra

Castellum has submitted an offer to the shareholders in the Norwegian listed property company Entra*. The offer entails both 8 newly issued shares in Castellum for every 13 shares in Entra, as well as NOK 54.39 in cash, and the opportunity to take part in further increases in value in the new company through both synergies and income from property management, transactions and project development.

To ensure a smooth and seamless transaction for Entra's shareholders and to demonstrate a firm commitment to Norway, Castellum has applied for a secondary listing of its shares on Oslo Børs (alternatively Euronext Expand) (the "Oslo Stock Exchange") in connection with the Offer (the "Listing"). The Listing was approved by the Oslo Stock Exchange on 6 January 2021, provided that certain listing requirements are met.

TIMELINE
Offer period	8 Jan 2021, 9:00 am–6 Feb 2021, 6:00 am
Settlement of Offer	On or about 16 Feb 2021
First date of listing on OSE	On or about 16 Feb 2021

The combination with Entra will provide an excellent platform for creating continued shareholder value and is logical, from an industrial standpoint: a major Nordic property company with a portfolio value of approximately SEK 145 billion will be created, with a focus on offices, warehouses and logistics. Active property management in combination with a shift in the portfolio through both project development and transactions will enable increased income from property management and net asset value.

The total ongoing development portfolio totals approximately SEK 9 billion, in which large projects are expected to be completed in late 2021 and beyond. In addition, there are potential projects/pipeline with 1.8 million square metres of lettable area, of which 400,000 square metres have completed detailed development plans and are thus awaiting construction permits and/or customers. Of these, 1.8 million square metres, approximately 1.2 square metres is logistics.

Government authorities and agencies comprise approximately 40 % of income, and contribute longer durations in the contract portfolio, providing conditions for stable earnings. The company will have one of the strongest balance sheets in the Nordic property sector, and has the objective of retaining Entra's Baa1 rating (Castellum currently has Baa2).

A new, larger company will enable synergies of approximately MSEK 300 on a yearly basis, which should be realised within two years of the consolidation. By 2022, which will be the first year as a consolidated group, positive growth in income from property management in SEK per share as well as in net asset value in SEK per share is expected while the company will have lower borrowing levels and will remain well capitalised. If the company does not see sufficiently positive investment opportunities and it is comfortable in its existing financial risk, the "surplus liquidity" can be returned to the owners in some form.

Sales

Castellum also announced the sale of a mature, stabilised asset portfolio, consisting primarily of assets in warehouse/logistics of various ages, to Blackstone for net proceeds of approximately SEK 18.1 billion, less expenses and deferred tax of approximately MSEK 900. The sale is divided into two tranches:

• Portfolio No. 1, with a net sale price of approximately SEK 5.0 billion and a valuation at year-end of approximately SEK 4.8 billion, expected to be handed over in early February. In conjunction with the sale, deferred tax income of MSEK 600 will be recognised. The transaction was contingent upon approval by the competition authority, which was granted in January and will thus be recognised as sold during the first quarter 2021.
• Portfolio No. 2, with a net sale price of approximately SEK 13.1 billion and a valuation at year-end of approximately SEK 12.7 billion, expected to be handed over in the beggining of March or early April. In conjunction with the sale, deferred tax income of SEK 1.8 billion will be recognised. The transaction is contingent upon both approval by the competition authority (which was granted in January) and completion of the acquisition of Entra.

The sales will bring in an additional MSEK 550 in realised changes in value (corresponding to the portfolio premium) when the transactions are closed, which will add a further SEK 2 in net asset value in SEK per share over and above the SEK 214 per share at year-end.

The sales consist of 78% warehouse/logistics, 12% light industry, 5% retail and 5% offices. With this transaction, Castellum reveals the value creation of the company's existing assets through active property management and portfolio development that will accrue to both current and future shareholders.

If the offer to Entra is not completed, Castellum will receive approximately SEK 5 billion in proceeds, thereby fortifying an already healthy balance sheet, which will provide the company with the opportunity to put its pace of investment into a higher gear, reduce its financial risk and/or distribute capital to its owners. If the offer to Entra is not completed, Castellum will be free to choose whether or not the company still wishes to carry out the second tranche of the transaction. All these are alternatives for action that make the company stronger and even better equipped to create future value.

Castellum has signed credit agreements in conjunction with the announcement of the company's intention to present an offer to the shareholders of the listed property company Entra. The credit agreements constitute both a backup facility for Entra's outstanding liabilities and bridge financing for the offer itself. The total volume is approximately NOK 30 billion.

VALUE FOR ENTRA'S SHAREHOLDERS WHO ACCEPT THE OFFER
Cash	NOK 54
Share as of the balance sheet date 31 Dec 2020	NOK 135
Offer consideration:	NOK 189
Synergies (max shares election)	NOK 16
Total including upside from synergies NOK 205

* The offer is not being made, directly or indirectly, in or into, nor will any tender of shares be accepted from or on behalf of holders in, any jurisdiction (including without limitation Australia, Canada, Hong Kong, Japan, New Zealand, South Africa or Switzerland) or the United States in which the making of the offer, the distribution of press releases etc. or the acceptance of any tender of shares would contravene applicable laws or regulations or require further offer documents, filings or other measures in addition to those required under Norwegian law.

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. During the fourth quarter, however, the worst negative forecasts were adjusted. The majority of financial commentators feel that the economic recovery experienced during the latter part of the year, compared with the negative trend that left its mark primarily on the second quarter of 2020, will continue in 2021. Nonetheless, unemployment in Sweden is expected to rise to just over 9% in 2021. Sweden's GDP for full-year 2020 fell 4% to then recover +2.6% in 2021, after which a robust increase in growth to +5% is predicted for 2022 (Riksbank, November 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 markedly positively as regards price performance. The housing market could be negatively impacted, however, if unemployment rises and economic activity falls even further, resulting in 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, though it strengthened during the summer and, for example, closed in on the ten-krona level against the EUR. According to the Riksbank (November 2020), inflation – expressed in terms of CPIF – is expected to have fallen to +0.4% in 2020 and to then rise to approximately +0.9% in 2021 and +1.2% in 2022.

Danish and Finnish GDP growth and unemployment respectively were also severely impacted in 2020 as a consequence of the global coronavirus 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
Unemployment	8.6%	(November 2020)
Rate of inflation	0.5%	(December 2020, compared with December 2019)
GDP growth	4.9%	(Q3 2020, compared with Q2 2020)

Rental market

The coronavirus crisis continues to fundamentally change society. Harsher restrictions returned around the globe during late autumn. In Sweden, a new pandemic law has recently been introduced, which provides the Government with the possibility to inaugurate legally binding rules in contrast to previous recommendations. At the same time, vaccinations began with the new year and expectations of a recovery can be glimpsed in the market.

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 the company continues to offer office space at the same rental levels as prior to the pandemic.

Despite uncertainty going forward, Castellum is still showing premises and conducting business transactions. This is also demonstrated by the fact that net lettings in both existing portfolios and projects during both the fourth quarter and full-year 2020 were better than 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 leased in advance. During 2020, office rents in regional cities were stable.

The rents for offices in Helsinki's CBD in 2020 remained stable and consolidated on previous record levels. Strong demand has spread from the CBD in Helsinki to the surrounding areas. However, there is still a high vacancy rate in secondary areas, as well as in properties of lower quality.

In Copenhagen, rents in the CBD also remained stable in 2020. 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 was 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 has strengthened during the coronavirus crisis.

Source: Statistics Sweden

Property market

The volume for transactions over MSEK 40 in the transaction market in Sweden for 2020 totalled around SEK 183 billion (–218) over 447 transactions (446) through 31 December 2020.

Sentiment among investors in the Swedish property market remained strong during the quarter, and there is a great deal of interest in and capital for property investments in the market. During the fourth quarter of 2020, several major portfolio transactions took place at lower yields in both the Office and Warehouse/Logistics segments. The share of foreign investors through 31 December 2020 was approximately 27% (30), which remains a historically high figure. The Nordic property market remained attractive to international investors.

In Castellum's markets, the required yield for office properties was stable during the year, 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, a trend that seems to have strengthened during the ongoing coronavirus crisis. Low levels of supply among attractive logistics properties, in combination with high demand among investors, resulted in falling required yields during the year.

In Denmark, the transaction volumes in the property market totalled approximately DKK 65 billion (~52) through 31 December 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 5.0 billion (~6.6) through 31 December 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 properties 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 (November 2020) indicates that the repo rate will remain at zero at least until late 2023.

Swedish long-term interest rates fell drastically in 2019 through 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 during the autumn. At the end of 2020, the five-year swap rate was approximately 10 basis points, or 0.1%, which was marginally higher 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 during the autumn. At the end of December, the STIBOR 3m was once again negative, approximately 5 basis points below zero. Taken together, the yield curve was marginally positive between STIBOR 3m and the five-year swap rate at the end of the year.

Access to financing in the Swedish and international capital markets deteriorated radically at the end of the first quarter of 2020 and credit spreads then widened drastically. The situation improved somewhat in the second quarter to become markedly better in late summer and early autumn. The credit spread for investment-grade borrowers during the autumn has again approached the levels in effect in early 2020, 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 fourth 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 –0.55% at the end of the fourth quarter.

Castellum's agenda for the sustainable city

Castellum shall be one of the most sustainable property companies in Europe. 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 operations are conducted responsibly, creating long-term solutions from an economic, ecological and social perspective.

One of Castellum's most challenging sustainability targets is to achieve 100% climate neutrality for all its operations – including the value chain – by 2030 at the latest, thereby supporting the UN's climate agreement and the national ambition for a fossil fuel-free Sweden. This target has also been approved by the Science Based Targets initiative (SBTi), which means that the target has been approved by external experts and is following the science. The company's climate initiatives are largely built on climate-smart choice of materials, reduced carbon emissions through improvements to energy efficiency in properties, and using 100% renewable energy in the long term.

Over 90% of the company's emissions are primarily in new construction and reconstruction, where the manufacture of purchased materials such as concrete and steel represent the lion's share of emissions. Other emissions come primarily from the use of electricity by tenants, waste produced by tenants, heating and cooling of premises, and transportation.

Some activities that have been prioritised in order to achieve the company's climate targets are reducing the use of emissions-intensive materials such as concrete and steel in new construction and reconstructions. With a conscious choice of materials and smart architecture alone, emissions in new construction can be reduced by 15% on average, which Castellum is now imposing as a requirement on all new major projects. Increasing the proportion of re-used and recycled materials also radically reduces emissions as well as switching the energy supply to more renewable energy.

Castellum works actively on enhancing energy efficiency, and will reduce energy use by 1.5% per year through smarter solutions, such as more intelligent control of buildings, automated lighting, insulation measures and high-efficiency recycling of heating and cooling. Another important measure for more

sustainable energy use is the expanded installation of solar cells on the roofs and façades of our properties, and energy storage as a next step. By producing our own solar energy, we can both supply our own properties with renewable energy and also export sustainable electricity to the Swedish power system.

Events during the quarter

During the quarter, one of Europe's largest roof-based solar cell installations went into operation on the roof of Hisingen Logistics Park. The installation, which is 30,000 square metres in area, is planned to begin delivering sustainable electricity at the start of the year. Read more on page 15.

The goal of 100% non-fossil fuel powered vehicles has been fulfilled and thus all vehicles—service cars, carpool vehicles and company cars—used by Castellum are electric or biofuel powered.

The new construction project "Emigranten" in Gothenburg was certified under Miljöbyggnad level Gold during the quarter. This certification means that the building was graded on the basis of three focus areas: energy use, indoor climate and choice of materials. All this is to ensure strong environmental performance, where both property owner and tenant have proof of their solid sustainability initiatives.

In December, the company took part in one of the UN's equality forums, at which Castellum's equality initiatives were described; during the year, this resulted in Castellum being ranked by European Women on Boards as Europe's most equitable company out of 600 listed companies in Europe.

During the quarter, Castellum received several awards for its successful sustainability efforts, including the highest marks in the Carbon Disclosure Projects (CDP), a listing on the Dow Jones Sustainability Index, and ranking as a sector leader in the Global Real Estate Sustainability Benchmark (GRESB) for the fifth consecutive year.

20192019

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.

	2020	2019	2018	2017	2016
Total energy use, kWh per sq. m.	75	88	97	94	98
Total energy use, normalised, kWh per sq. m.	87	95	103	100	104
1. of which actual heating	50	60	64	64	69
2. of which normalised heating	62	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	0.1	0.1	0.2	0.3	0.1
of which Scope 2	0.9	1.4	1.0	1.4	1.8
Total water use, m3 per sq. m.	0.25	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.

ONGOING TARGETS	2020		2020		2020
1% water conservation per year 6)	–13%	Bring ecosystem ser vices to major projects	100%	4% of all employees to be apprentices or interns	2%7)
1.5% energy efficiency enhancements per year 6)	–12%	<2% short-term sick leave	1.0%	Create job opportunities in projects for young people and the long-term unemployed	100%
All new production and major reconstructions sustainability certified	100%	<3% long-term sick leave	1.2%	100% of employees to be trained in the Code of Conduct	86%

1. 39 out of 100 solar cell installations are complete

2. 1. See the complete account by occupational category in the Annual Report
3. 1. In the "like-for-like" portfolio

4. Measured annually 4. Well under the target of 1.3

5. 1. To be reported for the first time at the end of 2021
6. 1. Project on hold due to coronavirus

Condensed consolidated statement of comprehensive income

MSEK		2020 Oct–Dec	2019 Oct–Dec	2020 Jan–Dec	2019 Jan–Dec
Rental income		1,363	1,331	5,438	5,265
Service income		127	114	454	452
Co-working income		26	33	112	104
Income	Note 2	1,516	1,478	6,004	5,821
Operating costs	Note 3	–182	–192	–654	–711
Maintenance expenses	Note 3	–54	–47	–145	–157
Property tax	Note 3	–93	–92	–371	–367
Co-working expenses	Note 3	–31	–29	–120	–99
Lettings and property administration expenses	Note 3	–113	–107	–379	–374
Net operating income		1,043	1,011	4,335	4,113
Central administrative expenses	Note 3	–44	–44	–149	–163
Acquisition costs	Note 4	–25	—	–25	–9
Net financing costs	Note 5
Net interest costs		–205	–195	–786	–782
Financing fees, etc. for acquisitions		–70	—	–70	—
Letting cost/Site leasehold fee		–2	–6	–20	–22
Income from prop. mgmt incl. acquisition/financing costs*	Note 1	697	766	3,285	3,137
Income from property management		792	766	3,380	3,146
Goodwill, impairment		—	—	—	–179
Changes in value	Note 6
Properties		3,047	1,413	3,863	3,918
Derivatives		92	306	–120	–111
Income before tax		3,836	2,485	7,028	6,765
Current tax	Note 7	–107	48	–247	–165
Deferred tax	Note 8	–663	–520	–1,166	–950
Net income for the period/year		3,066	2,013	5,615	5,650
Other comprehensive income
Items that can be reclassified to net income for the period
Translation difference of currencies, etc.		–275	–174	–216	92
Changes in values on derivatives, currency hedge		123	163	44	–47
Comprehensive income for the period/year**		2,914	2,002	5,443	5,695
Average number of shares, thousand		275,197	273,201	273,628	273,201
Income, SEK/share		11.14	7.37	20.52	20.68

* For calculation, refer to key financial metrics, page 27.

** 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 28.

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 – December 2020

NOTE 1 Income from property management

Income from property management (i.e. net income excluding acquisition costs and financing fees for acquisitions, changes in value and tax) for the period January–December 2020 amounted to MSEK 3,380 (3,146), corresponding to SEK 12.35 per share (11.52) – an increase of 7%.

SEGMENT INFORMATION

	Income		Income from property management
MSEK	2020 2019 Jan–Dec Jan–Dec		2020 Jan–Dec	2019 Jan–Dec
Central	1,595	1,504	913	815
West	1,365	1,328	790	749
Öresund	1,262	1,176	747	665
Stockholm–North	1,611	1,651	1,025	1,008
Finland	59	58	8	22
Co-working	112	104	–10	1
Total	6,004	5,821	3,473	3,260

The difference between the income from property management of MSEK 3,473 (3,260) above and the Group's reported income before tax of MSEK 7,028 (6,765) consists of unallocated income from property management of MSEK –93 (–114), acquisition costs of MSEK –25 (–9), financing fees for acquisitions of MSEK 70 (–), impairment of goodwill of MSEK – (179), change in values on properties of MSEK 3,863 (3,918) and change in values on derivatives of MSEK –120 (–111).

NOTE 2 Income

The Group's income totalled MSEK 6,004 (5,821). Rental income includes discounts of MSEK 119 (90) as well a lump sum of MSEK 16 (16) 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 93.1% (93.8), 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 112 (104) in the period.

DEVELOPMENT OF INCOME

MSEK	2020 Jan–Dec	2019 Jan–Dec	Change, %
Like-for-like portfolio	5,377	5,259	2.2%
Development properties	254	190
Transactions	261	268
Co-working	112	104
Income	6,004	5,821	3.1%

Rental income in the like-for-like portfolio increased 2.2%, which was due to higher rents, up 2.8%, but also to higher vacancies and discounts of 0.6%. Gross lettings (i.e. the annual value of total lettings) during the period was MSEK 644 (411), of which MSEK 258 (56) pertained to lettings in conjunction with new construction, extensions and reconstructions. Notices of termination amounted to MSEK 405 (435), of which bankruptcies were MSEK 9 (16) and MSEK 17 (18) were notices of termination with more than 18 months left of contract. Accordingly, net lettings for the period totalled MSEK 239 (–24). 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.

INCOME FROM PROPERTY MANAGEMENT PER SHARE NET LETTINGS

Note 2 cont.

	NET LETTINGS JAN–DEC 2020
			Region
MSEK	Central	West	Öre sund	Sthlm	North	Fin land	Total
NEW LETTINGS
Existing prop.	109	107	58	100	9	3	386
Investments	63	27	143	22	3	—	258
Total	172	134	201	122	12	3	644
NOTICES OF TERMINATION
Existing prop.	–83	–95	–117	–99	–2	—	–396
Bankruptcies	–1	—	–7	–1	—	—	–9
Total	–84	–95	–124	–100	–2	—	405
Net lettings	88	39	77	22	10	3	239
Net operating income Q4 2019	–44	–48	39	40	1	–12	–24

NOTE 3 Costs

Direct property costs totalled MSEK 1,170 (1,235), corresponding to SEK 279/sq. m. (292). Property costs for the like-for-like portfolio decreased 6%. In addition, expenses for co-working totalled MSEK 120 (99).

Property administration totalled MSEK 379 (374), corresponding to SEK 90/sq. m. (92).

Central administrative expenses were MSEK 149 (163). Central administrative expenses also included costs related to the profit and share price-related incentive plans for members of Executive Management of MSEK 14 (10).

COST TRENDS

MSEK	2020 Jan–Dec	2019 Jan–Dec	Change, %
Like-for-like portfolio	1,048	1,119	–6.3%
Development properties	61	51
Transactions	61	65
Direct property costs	1,170	1,235	–5.3%
Co-working	120	99
Property administration	379	374
Central administration	149	163
Total costs	1,818	1,871	–2.8%

Consumption for heating during the period has been calculated at 79.5% (88.2) of a normal year according to the degree day statistics.

PROPERTY COSTS

SEK/sq. m.	Offices	Public sector properties	Ware house/ logistics	Light industry	Retail	Total
Operating costs	208	173	93	98	134	155
Maintenance expenses	56	35	18	25	32	38
Property tax	130	112	28	27	75	86
Property costs	394	320	139	150	241	279
Lettings & prop. admin.						90
Total	394	320	139	150	241	369
Net operating income Q4 2019	401	333	154	170	252	384

NOTE 4 Acquisition costs

In the fourth quarter, Castellum announced its intention to present the shareholders of Entra with an offer to acquire the Norwegian listed property company. The acquisition costs worked up total approximately MSEK 25.

NOTE 5 Net financing costs

Net interest was MSEK –786 (–782). The average interest rate over the period was 1.9% (2.0). Net interest was positively affected by approximately MSEK 27 due to the 0.07 percentage point decrease in the average interest rate. Furthermore, interest costs for leases amounted to MSEK 20 (22), of which site leasehold fees were MSEK 18 (18).

Castellum signed credit agreements both to ensure financing of the acquisition of Entra and to have full coverage for Entra's outstanding interest-bearing liabilities. Net income for the period was charged with approximately MSEK 70 for these credits.

NOTE 6 Changes in value

Both interest in property investments (which was rather uncertain in the first half-year) and access to capital strengthened during the second half-year, which 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, with secure cash flows remaining particularly attractive. Castellum recognised an unrealised change in value of MSEK 3,712 (4,276). Moreover, sales of MSEK 151 (–358) were recognised, which comprised an earnout from the sale of the Archimedes property in Stockholm in 2018 (the detailed development plan entered force during 2020 and the transaction has finally been settled) as well as the sale of five properties at a price that exceeded their value by approximately MSEK 30.

Castellum has signed agreements on the sale of a property portfolio to Blackstone for approximately SEK 18.1 billion, net, less costs for transaction and deferred tax of approximately MSEK 900, entailing an underlying property value of approximately SEK 19 billion. The sale is divided into two tranches:

• Portfolio No. 1, with a net sale price of approximately SEK 5 billion and a valuation at year-end of approximately SEK 4.8 billion, expected to be handed over in early February. The transaction was contingent upon approval by the competition authority (was granted in January) and will be recognised as sold during the first quarter in 2021.

Note 6 cont.

• Portfolio No. 2, with a net sale price of approximately SEK 13.1 billion and a valuation at year-end of approximately SEK 12.7 billion, expected to be handed over in late March or early April. The transaction is contingent upon both approval by the competition authority (which was granted in January) and the acquisition of Entra going through.

The aforementioned portfolios showed unrealised changes in value of approximately SEK 1.6 billion in the last quarter. The portfolio premium, which totals approximately 3% of the net sale price or 15 basis points in yield requirement, has not been taken into account. The portfolio premium, totalling approximately MSEK 550, will only be realised as a change in value upon transfer.

The value of the derivatives changed by MSEK –120 (–111), mainly due to changes in long-term market interest rates.

CHANGE IN VALUES ON PROPERTIES

MSEK	2020 Jan–Dec	2019 Jan–Dec
Cash flow	502	1,638
Project gain	780	532
Required yield	2,065	1,742
Acquisitions	365	364
Unrealised change in value	3,712	4,276
NOI %	3.7%	4.7%
Sales	151	–358
Total	3,863	3,918
NOI %	3.9%	4.3%

NOTE 7 Tax

Recognised tax totalled MSEK 1,413 (1,115), of which MSEK 247 (165) 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 of tax depreciations and direct deductions for some property reconstruction projects as well as making use of tax loss carry forwards, the tax paid expense is low. Tax paid arises as a result of existing tax loss carry forwards being locked in and can thus not be utilised in Castellum as a whole.

Remaining tax loss carry forwards can be calculated at MSEK 603 (854). Furthermore, there are untaxed reserves of MSEK 671 (327). Fair values for the properties exceed their fiscal value by MSEK 63,027 (56,365) of which MSEK 7,872 (6,553) 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 11,376 (10,153) – is recognised as a deferred tax liability.

TAX CALCULATION 2020
MSEK	Basis current tax	Basis deferred tax
Income from property management	3,380
Non-deductible interest	174
Deductions for tax purposes
depreciation	–1,319	1,319
reconstructions	–392	392
Other tax adjustments	–439	165
Taxable income from property
management	1,404	1,876
current tax if tax loss carry forwards not uti lised	300
Sales of properties	3	–181
Change in values on properties	—	3,712
Taxable income before tax loss carry
forwards	1,407	5,407
Tax loss carry forwards, opening bal
ance	–854	854
Tax loss carry forwards, closing balance	603	–603
Taxable income	1,156	5,658
Tax according to the income statement for the period	–247	–1,166

NET DEFERRED TAX LIABILITY 31 DEC 2020
MSEK	Basis	Nominal tax liability	Real tax liability
Tax loss carry forwards	603	129	129
Untaxed reserves	–671	–144	–144
Properties	–63,027	–12,983	–2,270
Total	–63,095	–12,998	–2,285
Properties, asset acquisi tions	7,872	1,622
In the balance sheet	–55,223	11,376

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%. Furthermore, 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.

Castellum has no ongoing tax disputes.

Condensed Consolidated Balance Sheet

MSEK		31 Dec 2020	31 Dec 2019
ASSETS
Investment properties	Note 8	103,042	95,168
Goodwill	Note 9	1,673	1,691
Leases, right-of-use	Note 10	888	846
Financial assets	Note 11	2,729	—
Other fixed assets		200	179
Current receivables		1,223	928
Cash and cash equivalents		161	173
Total assets		109,916	98,985
EQUITY AND LIABILITIES
Equity		48,243	43,777
Deferred tax liability	Note 7	11,376	10,153
Other provisions		3	5
Interest-bearing liabilities	Note 11	45,720	40,826
Derivatives	Note 12	1,132	715
Lease liability	Note 10	888	846
Non-interest bearing liabilities		2,554	2,663
Total equity and liabilities		109,916	98,985
Pledged assets (pledged mortgages)		21,231	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-con trolling 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 2019	—	—	—	—	—	—	5,650	5,650
Other comprehensive income 2019	—	—	—	92	–47	—	—	45
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	–170	—	—	—	—	—	–28	–28
Share issue in kind	4,062	2	825	—	—	—	—	827
Net income 2020	—	—	—	—	—	—	5,615	5,615
Other comprehensive income 2020	—	—	—	–216	44	—	—	–172
Equity 31 Dec 2020	277,093	139	13,259	150	–272	–2	34,969	48,243

Balance sheet, 31 December 2020

Investment properties

The property portfolio is located in growth areas in Sweden, Copenhagen and Helsinki. The commercial portfolio consists of 48% office, 21% public sector properties, 18% 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 4% consists of projects and undeveloped land.

Castellum owns approximately 670,000 square metres of unutilised building rights and ongoing larger projects with remaining investments of approximately SEK 3.2 billion.

Investments

During the period, investments totalling MSEK 5,158 (6,112) were carried out, of which MSEK 2,646 (3,350) were acquisitions and MSEK 2,512 (2,762) new construction, extensions and reconstructions. After sales and cash settlements of MSEK 891 (4,138), net investments amounted to MSEK 4,267 (1,974).

CHANGES IN THE PROPERTY PORTFOLIO
	Fair value, MSEK	Number
Property portfolio on 1 January 2020	95,168	632
+ Acquisitions	2,646	16
+ New construction, extensions and reconstructions	2,512	–1
– Sales	–740	–5
+/- Unrealised changes in value	3,712	—
+/- Currency translation	–256	—
Property portfolio on 31 Dec 2020	103,042	642

Property value

Internal valuations

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

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 1,750 (1,600) 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 are and have been small.

Based on these internal valuations, property value at the end of the period was assessed at MSEK 103,042 (95,168), corresponding to SEK 23,549 (22,363) 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 5.0% (5.1).

MSEK
4,771
294
17
–133
4,949
98,953
5.0%

Valuation yield per category	31 Dec 2020	31 Dec 2019
Offices	4.9%	5.0%
Public sector properties	4.8%	4.8%
Warehouse/logistics	5.2%	5.6%
Retail	5.5%	5.8%
Light industry	5.9%	6.6%
Total	5.0%	5.1%

14

Note 8 cont.

PROPERTY-RELATED KEY METRICS

	2020 Jan–Dec	2019 Jan–Dec
Rental value, SEK/sq. m.	1,538	1,495
Economic occupancy rate	93.1%	93.8%
Property costs, SEK/sq. m.	369	384
Net operating income, SEK/sq. m.	1,039	1,001
Property value, SEK/sq. m.	23,549	22,363
Number of properties	642	632
Lettable area, thousand sq. m.	4,447	4,255
Average valuation yield	5.0%	5.1%

Uncertainty range

The value of a property can only be established when it is sold. The value range indicated in property valuations, which in a functioning market most often lies within +/– 5–10%, should be regarded as a measurement of the uncertainty in the assumptions and calculations made. In a less liquid market, the range may be wider. For Castellum, an uncertainty range of +/- 5% means a range in value of the property portfolio of MSEK 97,890–108,194, equivalent to MSEK +/– 5,152.

External valuation

In order to validate the valuation, 174 properties, equivalent in value to 54% of the portfolio, were valued externally by Forum Fastighetsekonomi AB in Sweden and CBRE in Denmark. The properties were selected on the basis of the largest properties in terms of value, but also to reflect the composition of the property portfolio as a whole in terms of category and geographical location. The external valuations of the selected properties totalled MSEK 54,920, within an uncertainty range of +/– 5–10% at the property level, depending on the category and location of the respective properties. Castellum's valuation of the same properties totalled MSEK 55,666, i.e., a net deviation of MSEK 746 corresponding to 1.4%. The gross deviations were MSEK 1,130 and MSEK -1,876 respectively, with an average deviation of 5.4%.

It should be noted that Castellum's deviation in relation to the external valuers falls well within the uncertainty range of +/– 5–10%.

EUROPE'S LARGEST ROOF-BASED SOLAR CELL INSTALLATIONS

One of Europe's largest roof-based solar cell installations is located in Gothenburg. It is in the Hisingen Logistics Park, where Castellum's customer Jollyroom has its new premises. The roof-based installation is 30,000 square metres (or 5 football pitches) in size and produces energy equivalent to the annual demand for 660 detached houses.

During the year, Castellum began constructing 14 large solar cell installations, and by 2025 the company will have constructed at least 100 large solar cell installations. This solar energy initiative is being coordinated in the solar cell programme that goes under the name "100 på sol".

Other measures that Castellum is working actively with to achieve 100% non-fossil energy use are transitioning to renewable district heating and purchasing renewable electricity from hydroelectric and wind power. Going forward, the company also sees that energy storage will need to be part of the solution in order to reduce peak load times.

Castellum's property portfolio

			31 Dec 2020					January–December 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 operating income, MSEK
OFFICES
Stockholm	31	291	12,922	44,413	705	2,424	90.4%	635	122	420	513
West	66	376	11,011	29,327	682	1,815	92.5%	618	122	325	496
Central	79	557		11,166 20,040	860	1,544	91.9%	778	196	352	582
Öresund	43	398	11,419	28,701	846	2,127	92.0%	759	178	447	581
North	2	5	102	20,802	8	1,632	98.4%	8	2	423	6
Finland	7	58	2,712	46,622	181	3,120	86.2%	157	44	756	113
Total Office	228	1,685		49,332 29,286	3,282	1,949	91.4%	2,955	664	394	2,291
PUBLIC SECTOR PROPERTIES
Stockholm	12	89	5,839	65,389	283	3,168	97.2%	268	42	472	226
West	12	79	1,614	20,367	108	1,360	90.4%	96	18	232	78
Central	31	317	8,707	27,488	565	1,783	96.7%	543	103	326	440
Öresund	9	98	3,651	37,374	219	2,244	98.7%	214	29	295	185
North	10	100	2,068	20,705	149	1,492	95.3%	141	26	259	115
Total Public sector properties	74	683		21,879 32,039	1,324	1,939	96.5%	1,262	218	320	1,044
WAREHOUSE/LOGISTICS
Stockholm	38	276	5,971	21,597	343	1,242	91.9%	310	42	151	268
West	70	631	8,213	13,021	518	821	93.8%	467	77	122	390
Central	30	166	1,661	10,024	135	812	87.7%	117	24	147	93
Öresund	36	237	2,601	10,973	199	842	94.9%	184	39	163	145
Total Warehouse/Logistics	174	1,310	18,446	14,082	1,195	912	92.8%	1,078	182	139	896
RETAIL
Stockholm	28	149	3,542	23,701	230	1,537	94.9%	215	33	216	182
West	16	66	1,290	19,662	84	1,278	96.9%	78	17	267	61
Central	21	114	1,880	16,533	147	1,288	97.6%	140	28	242	112
Öresund	11	45	840	18,455	69	1,522	90.2%	61	13	289	48
Total Retail	76	374	7,552	20,177	530	1,414	95.4%	494	91	241	403
LIGHT INDUSTRY
Stockholm	10	43	792	18,302	54	1,250	95.5%	51	9	210	42
West	15	62	763	12,384	54	873	95.8%	51	8	123	43
Central	10	29	404	13,844	31	1,070	96.8%	30	5	189	25
Öresund	4	42	393	9,337	33	792	94.0%	31	4	100	27
Total Light Industry	39	176	2,352	13,353	172	979	95.5%	163	26	150	137
Total investment properties	591	4,228		99,561 23,549	6,503	1,538	93.1%	5,952	1,181	279	4,771
Lettings and property administration
expenses									379	90	–379
Total after lettings and property administration									1,560	369	4,392
Projects	34	219	3,011	—	82	—	—	46	26	—	20
Undeveloped land	17	—	470	—	—	—	—	—	—	—	—
Total	642	4,447	103,042	—	6,585	—	—	5,998	1,586	—	4,412

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 4,412 reported above and the net operating income of MSEK 4,335 in the income statement is explained both by the deduction of the net operating income of MSEK 42 in properties sold during the year, by the MSEK 111 upward adjustment of the net operating income on properties acquired/completed during the year, which are recalculated as if they had been owned or been completed during the entire period, and the exclusion of MSEK -8 from the co-working company in the table above.

A more detailed description about property categories is available on page 33, 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 2021 is primarily due to the fact that most contracts have already been renegotiated.

LEASE MATURITY STRUCTURE, 31 DEC 2020
MSEK	No. of leases	Lease value, MSEK	Percentage of value
Commercial, term
2021	1,612	384	7%
2022	1,516	1,124	20%
2023	1,245	1,140	20%
2024	788	854	15%
2025	226	496	8%
2026+	330	1,558	27%
Total commercial	5,717	5,556	97%
Residential	446	42	1%
Parking spaces and other	5,911	101	2%
Total	12,074	5,699	100%

Risk exposure, credit risk

Castellum's lease portfolio features a good risk exposure. The Group has approximately 5,700 commercial leases and 446 residential leases, and their distribution in terms of size is presented in the table below. The single largest lease accounts for 2% of the Group's total rental income, while the corresponding figure for the single largest customer is 3%. This means that Castellum's exposure to credit risk from a single customer is very low.

The remaining average length of contract was 3.9 years.

LEASE SIZE
Lease size, MSEK	No. of leases	Share	Lease value, MSEK	Share
Commercial
<0.25	2,777	23%	199	3%
0.25–0.5	922	8%	340	6%
0.5–1.0	831	7%	590	10%
1.0–3.0	795	6%	1,374	24%
<3.0	392	3%	3,053	54%
Total	5,717	47%	5,556	97%
Residential	446	4%	42	1%
Parking spaces and other	5,911	49%	101	2%
Total	12,074	100%	5,699	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 – FULLY/PARTIALLY OCCUPIED New construction, logistics Investment: MSEK 337

2. Backa 20:5

GOTHENBURG • ONGOING

New construction, warehouse/office Investment: MSEK 82

1. Masthugget 26:1 GOTHENBURG • COMPLETED – FULLY/PARTIALLY OCCUPIED New construction, office Investment: MSEK 238

17

5 6

10

11

8

ÖREBRO • ONGOING New construction, office Investment: MSEK 227

ONGOING

COMPLETED – FULLY/PARTIALLY OCCUPIED

1. Öskaret 1 STOCKHOLM New construction, warehouse/logistics Investment: MSEK 208

UPPSALA • ONGOING

1. Moränen 3 MALMÖ

• COMPLETED – FULLY/PARTIALLY OCCUPIED Reconstruction, office Investment: MSEK 638

• COMPLETED – FULLY/PARTIALLY OCCUPIED

New construction, light industry Investment: MSEK 54

1. Dragarbrunn 21:1

New/reconstruction office Investment: MSEK 493

1. Verkstaden 14 VÄSTERÅS • ONGOING New construction, office Investment: MSEK 198

2. Hissmontören 4, Örebro ÖREBRO • ONGOING New construction, office

1

2

3 4

9

18

7

Larger investments

Larger ongoing investments

			Rental value		Total inv.
Property	Area, sq. m.	MSEK	SEK/sq. m.	Econ. occup. Oct 2020	incl. land, MSEK	Of which inv., MSEK	Remaining inv.,	MSEK Completed	Category
Sjustjärnan 1/E.ON, Malmö	31,460	78	2,775	91%	1,296	349		947 Q1 2023	New construction, office
Godsfinkan 1, Malmö	26,500	81	3,030	91%	1,270	471		799 Q1 2023	New development, court
Dragarbrunn 21:1, Uppsala	14,130	45	3,150	72%	493	269		224 Q4 2021	New/reconstruction office
Götaland 5, Jönköping	9,200	23	2,500	100%	325	33		292 Q3 2022	New development, court
GreenHaus, Helsingborg	7,000	19	2,800	48%	305	195		110 Q2 2022	New construction, office
Sesemfröet 2, Mölndal	5,600	24	4,280	100%	280	17		263 Q3 2022	Rec. public sector properties
Korsningen 1, Örebro	5,650	15	2,800	100%	227	55		172 Q2 2022	New construction, office
Verkstaden 14, Västerås	5,800	14	2,430	88%	198	78		120 Q1 2022	New construction, office
Hissmontören 4, Örebro	3,400	9	2,650	50%	118	20		98 Q1 2022	New construction, office
Sellerin 3, Lund	5,190	7	1,300	40%	88	81		7 Q1 2021	New construction, warehouse/car dealership
Backa 20:5, Gothenburg	4,600	7	1,500	100%	82	65		17 Q1 2021	New construction, warehouse/office
Developments completed/partly occupied
Öskaret 1, Stockholm	10,841	60	5,550	77%	638	587		51 Q4 2020	Reconstruction, office
Hisingen Logistics Park 2, Gothenburg	36,700	28	750	100%	337	329		8 Q3 2020	New construction, logistics
Masthugget 26:1, Gothenburg	4,185	13	3,200	10%	238	222		16 Q4 2020	New construction, office
Örnäs 1:17, Upplands-Bro	15,719	15	1,000	100%	208	198		10 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					6,244	3,090	3,154

NOTE 9 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 10 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 888 (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 405 (363).

NOTE 11 Financial assets

In the fourth quarter, Castellum acquired 15 million shares for NOK 169 per share in the Norwegian listed property company Entra. The acquisition is a stage in the offer Castellum has announced to Entra's shareholders. According to the agreement with the seller, Castellum will pay the same amount as the public offering. As of 31 December 2020, Castellum's offer was approximately NOK 189 per share. The total acquisition cost is thus MSEK 2,729, of which MSEK 2,442 has already been paid. The closing price of the Entra share as of the end of the accounting period was approximately SEK 194 per share, corresponding to a market value at the end of the accounting period on holdings of MSEK 2,792.

NOTE 12 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 63,500 (60,604), of which MSEK 46,894 (49,433) was long-term and MSEK 16,606 (11,171) was

Note 12 cont.

short-term. Of the utilised borrowing facilities at the end of the period, MSEK 29,693 (30,233) was long-term and MSEK 15,866 (10,420) short-term.

After deduction of cash of MSEK 161 (173), net interestbearing liabilities were MSEK 45,559 (40,653), of which MSEK 29,127 (27,512) were bonds outstanding and MSEK 8,844 (5,136) commercial paper outstanding (nominal MSEK 29,145 and MSEK 8,853 respectively).

During the period, bank credit facilities of approximately MSEK 1,620 were raised with new counterparties, approximately MSEK 7,400 were extended and approximately MSEK 4,000 were settled. As part of its Swedish MTN program, Castellum has also issued new bonds with a nominal amount of MSEK 5,250 while bonds with a nominal value of MSEK 3,250 matured. At the end of the year, the framework amount for the Swedish MTN programme was raised to MSEK 25,000.

Most of Castellum's borrowings are revolving 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 45,559 (40,653), MSEK 7,588 (7,249) was pledged against property deeds and MSEK 37,971 (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 16% (13) of the properties' value. Castellum's share of unsecured assets at the end of the period was 61% (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: 44%, 530% 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 3.0 years (3.2). At the end of the period, the net debt to EBITDA ratio was 11 (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 considered to entail good financial flexibility for Castellum by supporting both Castellum's relative funding cost and access to loan capital over time.

CREDIT MATURITY STRUCTURE, 31 DECEMBER 2020
		Utilised in
Credit agreements	MSEK	Bank	MTN/Commer cial paper	Total	Share, %
0–1 year	16,606	2,071	13,795	15,866	35%
1–2 years	9,310	814	3,996	4,810	11%
2–3 years	16,799	880	7,619	8,499	19%
3–4 years	2,456	11	2,445	2,456	5%
4–5 years	8,204	11	3,793	3,804	8%
>5 years	10,125	3,801	6,323	10,124	22%
Total	63,500	7,588	37,971	45,559	100%

INTEREST RATE MATURITY, 31 DECEMBER 2020

Maturity date	MSEK**	Share, %	Average interest rate, %*	Average fixed interest rate term
0–1 year	22,588	50%	1.62%	0.2
1–2 years	3,148	7%	0.92%	1.5
2–3 years	5,603	12%	2.47%	2.8
3–4 years	1,797	4%	1.06%	3.5
4–5 years	2,599	6%	1.31%	4.5
5–10 years	9,824	21%	1.86%	7.8
Total	45,559	100%	1.69%	2.6

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

Note 12 cont.

Interest rate maturity structure

In order to secure a stable and low net interest cash flow, the interest rate maturity structure is distributed over time. The average fixed interest term was 2.6 years (3.3). The average effective rate at 31 December 2020 was 1.69% (1.82) excluding unutilised credit agreements, and 1.82% (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 9,091 (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.

NOTE 13 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 31 December 2020, the market value of the interest rate swap portfolio amounted to MSEK –740 (–592) and the currency derivative portfolio to MSEK –392 (–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%	44%
Interest coverage ratio	At least 200%	At least 150%	530%
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		14%
• average credit price tenor	At least 1.5 years		3.0 years
• liquidity reserve	Secured credit agreements corresponding to MSEK 750 and 4.5 months upcoming loan maturities		Achieved
Interest rate risk
• average interest duration	1.5–3.5 years		2.6 years
• maturing within 6 months	No more than 50%		44%
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 Oct–Dec	2019 Oct–Dec	2020 Jan–Dec	2019 Jan–Dec
Net operating income	1,043	1,011	4,335	4,113
Central administrative expenses	–44	–44	–149	–163
Reversed depreciation	24	18	95	64
Net interest paid	–259	–225	–789	–761
Tax paid	–167	–122	–177	–161
Translation difference of currencies	– 114	–11	–134	45
Cash flow from operating activities before change in working capital	483	627	3,181	3,137
Change in current receivables	75	527	–78	–165
Change in current liabilities	–105	14	–159	564
Cash flow from operating activities	453	1,168	2,944	3,536
Investments in new construction, extensions and reconstructions	–712	–701	–2,512	–2,762
Property acquisitions	–1,502	–561	–1,819	–3,350
Change in liabilities at acquisitions of property	–141	120	–304	273
Sales of properties	770	29	891	4,138
Change in receivables at sales of properties	–220	76	–217	161
Investment in financial assets	–2,442	—	–2,442	—
Other investments	–43	–129	–105	–425
Cash flow from investment activities	–4,290	–1,166	–6,508	–1,965
Change in long-term interest-bearing liabilities	3,791	261	5,345	540
Change in other long-term liabilities	—	–307	—	–307
Change in long-term receivables	9	—	11	8
Swap termination	—	—	—	–215
Repurchase of own shares	—	—	–28	—
Dividend paid	—	—	–1,776	–1,667
Cash flow from financing activities	3,800	–46	3,552	–1,641
Cash flow for the period/year	–37	–44	–12	–70
Cash and cash equivalents opening balance	198	217	173	243
Cash and cash equivalents closing balance	161	173	161	173

Parent Company

Condensed Income statement	2020	2019	2020	2019
MSEK	Oct–Dec	Oct–Dec	Jan–Dec	Jan–Dec
Income	27	44	102	105
Costs	–57	–67	–216	–222
Net financing costs	–30	–17	–8	13
Financing fees, acquisitions	–70	—	–70	—
Dividend/Group	2,083	1,541	2,083	1,541
Change in values on derivatives	176	357	–57	–137
Impairment of shares in Group companies	–70	202	–70	202
Income before tax	2,059	2,060	1,764	1,502
Tax	–32	–16	–15	2
Net income for the period/year	2,027	2,044	1,749	1,504
Comprehensive income for the Parent Company
Net income for the period	2,027	2,044	1,749	1,504
Items that will be reclassified into net income
Translation difference of currencies	–144	–80	–108	42
Unrealised change, currency hedge	122	111	44	–21
Comprehensive income for the period/year	2,005	2,075	1,685	1,525

Condensed Balance sheet MSEK	31 December 2020	31 December 2019
Participations, Group companies	20,957	20,147
Receivables, Group companies	43,709	39,707
Financial assets	2,729	—
Other assets	114	118
Cash and cash equivalents	6	54
Total	67,523	60,026
Equity	18,384	17,676
Derivatives	1,132	715
Interest-bearing liabilities	43,318	38,065
Interest-bearing liabilities, Group companies	4,126	3,346
Other liabilities	563	224
Total	67,523	60,026
Pledged assets (receivables, Group contributions)	16,974	17,343
Contingent liability (guaranteed commitments for subsidiaries)	2,170	2,538

Opportunities and risks

Opportunities and risks in the cash flow

Risk and uncertainty factors regarding cash flow from ongoing operations are 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	+60 / –60	+	—
Vacancies	+66 / –66	+	—
Property costs	–16 / 16	—	0
Interest cost*	–165 / 118	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 that in a functioning market should amount to +/– 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	–20,608	–10,304	0	10,304	20,608
Loan-to-value ratio	55%	49%	44%	40%	37%

Financial risk

Ownership of properties presumes a working credit market. Castellum's greatest financial risk is 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 125. Moreover, MSEK 14 in discounts linked to the state support have been given, where Castellum defrays 50%, meaning that MSEK 7 has already been fully charged to second quarter earnings.

Castellum's largest customer segment comprises government authorities and agencies, around 23% of total income, 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, third and fourth quarters has been paid to 99%, and Castellum's assessment is that the fourth 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 somewhat, with consequences that primarily renegotiations are slowed down and postponed.

Property projects

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

Transactions and property value

Investor sentiment in the Swedish property market declined sharply on the outbreak of the coronavirus crisis, only to clearly strengthen during the second half of the year. 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 significant need for offices in the future. The final design of the office, however, 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 by investors in these times. Though properties as an asset continue to attract great investor interest and the availability of capital is good, the real property assets are more polarised in their segments than ever before.

There has been an upswing in value in Castellum's portfolio, driven primarily by changed yield requirements for logistics/warehouses/light industry and project gains and to some extent improved cash flow. Impairment has been recognised on individual properties, mainly within retail, which was driven by higher yield requirements and lower cash flow.

Financing

Castellum has strong financial muscles, with unutilised credit facilities and cash and cash equivalents totalling approximately SEK 18 billion, which will easily cover all maturities in 2021 while there is headroom to meet the needs of operations. Castellum's credit maturity in 2021 consists of SEK 2.1 billion in bank deposits, SEK 8.8 billion in commercial paper and SEK 5.0 billion 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.

Quarterly summary

	2020 Jan–Mar	2020 Apr–Jun	2020 Jul–Sep	2020 Oct–Dec	2020	2019 Jan–Mar	2019 Apr–Jun	2019 Jul–Sep	2019 Oct–Dec	2019
Income statement, MSEK
Income	1,476	1,523	1,489	1,516	6,004	1,433	1,438	1,472	1,478	5,821
Costs	–438	–391	–367	–473	–1,669	–456	–371	–414	–467	–1,708
Net operating income	1,038	1,132	1,122	1,043	4,335	977	1,067	1,058	1,011	4,113
Central administrative expenses	–37	–38	–30	–44	–149	–48	–42	–29	–44	–163
Letting cost/Site leasehold fee	–7	.–5	–6	–2	–20	–4	–6	–6	–6	–22
Net interest costs	–200	–194	–187	–205	–786	–199	–202	–186	–195	–782
Income from property management	794	895	899	792	3,380	726	808	837	766	3,146
Acquisition and restructuring costs	—	—	—	–95	–95	—	–9	—	—	–9
Impairment of goodwill	—	—	—	—	—	–179	—	—	—	–179
Change in values on properties	3	415	398	3,047	3,863	689	1,193	623	1,413	3,918
Change in values on derivatives	–167	–42	–3	92	–120	– 12	–176	–120	306	–111
Current tax	–42	–40	–58	–107	–247	–33	–74	–106	48	–165
Deferred tax	–106	–176	–221	–663	–1,166	259	–506	–183	–520	–950
Net income for the year/period	482	1,052	1,015	3,066	5,615	1,341	1,245	1,051	2,013	5,650
Other comprehensive income	140	–178	18	–152	–172	34	25	–3	–11	45
Comprehensive income for the year/period	622	874	1,033	2,914	5,443	1,375	1,270	1,048	2,002	5,695
Balance sheet, MSEK
Investment properties	96,262	97,012	98,076	103,042	103,042	89,231	91,427	92,719	95,168	95,168
Goodwill	1,691	1,670	1,673	1,673	1,673	1,703	1,691	1,691	1,691	1,691
Other assets	2,257	2,196	2,158	5,040	5,040	2,749	2,122	2,147	1,953	1,953
Cash and cash equivalents	1,174	200	198	161	161	150	157	217	173	173
Total assets	101,384	101,078	102,105	109,916	109,916	93,833	95,397	96,774	98,985	98,985
Equity	42,623	43,469	44,502	48,243	48,243	39,457	40,727	41,775	43,777	43,777
Deferred tax liability	10,279	10,493	10,718	11,437	11,376	8,936	9,433	9,633	10,153	10,153
Other provisions	6	5	3	3	3	6	6	6	5	5
Derivatives	506	863	871	1,132	1,132	777	701	803	715	715
Interest-bearing liabilities	43,544	41,834	42,486	45,720	45,720	40,566	40,242	40,637	40,826	40,826
Non-interest bearing liabilities	4,426	4,414	3,525	3,381	3,442	4,091	4,288	3,920	3,509	3,509
Total equity and liabilities	101,384	101,078	102,105	109,916	109,916	93,833	95,397	96,774	98,985	98,985
Financial Key Metrics
Surplus ratio Interest rate level, on average	72% 2.0%	76% 1.9%	76% 1.9%	70% 1.9%	74% 1.9%	69% 2.1%	76% 2.1%	73% 2.0%	70% 1.9%	72% 2.0%
Interest coverage ratio	497%	561%	581%	486%	530%	465%	504%	550%	512%	502%
Return on EPRA NRV	4.1%	17.6%	9.3%	34.3%	13.4%	13.3%	14.5%	10.3%	19.6%	15.1%
Return on total capital	4.0%	5.9%	5.8%	14.9%	7.5%	7.0%	9.4%	6.9%	9.8%	8.4%
Return on equity	4.5%	9.9%	9.3%	27.6%	13.1%	13.8%	12.6%	10.3%	19.3%	14.5%
Investments in properties, MSEK	643	854	620	3,041	5,158	3,295	948	607	1,262	6,112
Sales, MSEK	—	119	2	770	891	4,021	36	52	29	4,138
Loan-to-value ratio	44%	43%	43%	44%	44%	45%	44%	44%	43%	43%
Data per share (since there are no potential shares, there is no dilution effect)
Average number of shares, thousand	273,201	273,113	273,031	275,197	273,628	273,201	273,201	273,201	273,201	273,201
Income from prop. mgmt., SEK	2.91	3.28	3.29	2.88	12.35	2.66	2.99	3.06	2.80	11.52
Income from prop. mgmt. after tax (EPRA
EPS), SEK	2.65	2.93	2.96	2.71	11.25	2.35	2.61	2.64	2.84	10.44
Earnings after tax, SEK	1.76	3.85	3.72	11.14	20.52	4.91	4.56	3.85	7.37	20.68
Number of shares outstanding, thousand	273,201	273,031	273,031	277,093	277,093	273,201	273,201	273,201	273,201	273,201
Property value, SEK	352	355	359	372	372	327	335	339	348	348
Net reinstatement value (EPRA NRV), SEK	193	199	200	214	214	178	184	186	195	195
Net tangible assets (EPRA NTA), SEK	185	190	191	205	205	170	177	178	187	187
Net disposal value (EPRA NDV), SEK	153	156	157	168	168	141	146	147	154	154
Dividend, SEK (2020 proposed)	—	—	—	—	6.90	—	—	—	—	6.50
Dividend payout ratio	—	—	—	—	56%	—	—	—	—	56%
Property-related key metrics
Rental value, SEK/sq. m.	1,516	1,551	1,546	1,640	1,538	1,462	1,502	1,532	1,529	1,495
Economic occupancy rate	93.8%	94.1%	92.4%	92.3%	93.1%	94.5%	94.4%	93.6%	92.9%	93.8%
Property costs, SEK/sq. m.	383	344	331	441	369	419	333	374	420	384
Property value, SEK/sq. m. Valuation yield	22,451 5.1%	22,541 5.1%	22,836 5.1%	23,549 5.0%	23,549 5.0%	21,084 5.1%	21,679 5.1%	21,971 5.1%	22,363 5.1%	22,363 5.1%

Multi-Year Summary

	2020	2019	2018	2017	2016	2015	2014	2013	2012	2011
Income statement, MSEK
Income	6,004	5,821	5,577	5,182	4,533	3,299	3,318	3,249	3,073	2,919
Property costs	–1,669	–1,708	–1,632	–1,605	–1,497	–1,074	–1,096	–1,105	–1,042	–1,003
Net operating income	4,335	4,113	3,945	3,577	3,036	2,225	2,222	2,144	2,031	1,916
Central administrative expenses	–149	–163	–158	–162	–143	–113	–108	–96	–93	–83
Joint venture (income from prop. mgmt)	—	—	—	—	3	23	—	—	—	—
Letting cost/Site leasehold fee	–20	–22	—	—	—	—	—	—	—	—
Net interest costs	–786	–782	–835	–885	–832	–602	–664	–702	–683	–660
Income from prop. mgmt incl. joint venture income	3,380	3,146	2,952	2,530	2,065	1,533	1,450	1,346	1,255	1,173
Acquisition and restructuring costs	–95	–9	—	–5	–163	—	—	—	—	—
Impairment of goodwill	—	–179	—	—	–373	—	—	—	—	—
Change in values on properties	3,863	3,918	5,216	4,540	4,085	1,837	344	328	–69	194
Change in values on derivatives	–120	–111	152	247	82	216	–660	429	–110	–429
Revaluation of results due to stepwise acquisition	—	—	—	—	27	–2	—	—	—	—
Current tax	–247	–165	–74	–96	–23	–16	–11	–6	–7	–10
Deferred tax	–1,166	–950	–793	–1,340	–727	–687	88	–390	404	–217
Net income for the year/period	5,615	5,650	7,453	5,876	4,972	2,881	1,211	1,707	1,473	711
Other comprehensive income	–172	45	8	–8	6	–8	8	3	–4	0
Comprehensive income for the year/period	5,443	5,695	7,461	5,868	4,978	2,873	1,219	1,710	1,469	711
Balance sheet, MSEK
Investment properties	103,042	95,168	89,168	81,078	70,757	41,818	37,599	37,752	36,328	33,867
Goodwill/Joint venture (2015)	1,673	1,691	1,659	1,659	1,659	526	—	—	—	—
Other assets	5,040	1,953	1,070	772	5,640	269	442	291	259	207
Cash and cash equivalents	161	173	243	203	257	39	47	70	44	97
Total assets	109,916	98,985	92,140	83,712	78,313	42,652	38,088	38,113	36,631	34,171
Equity	48,243	43,777	39,749	33,736	29,234	15,768	13,649	13,127	12,065	11,203
Deferred tax liability	11,376	10,153	9,203	8,405	7,065	4,299	3,612	3,700	3,310	3,714
Derivatives	1,132	715	716	1,352	1,582	1,117	1,357	683	1,105	1,003
Interest-bearing liabilities Non-interest bearing liabilities	45,720 3,445	40,826 3,514	40,358 2,114	38,226 1,993	38,467 1,965	20,396 1,072	18,446 1,024	19,481 1,122	19,094 1,057	17,160 1,091
Total equity and liabilities	109,916	98,985	92,140	83,712	78,313	42,652	38,088	38,113	36,631	34,171
Financial Key Metrics
Surplus ratio	74%	72%	71%	69%	67%	67%	67%	66%	66%	66%
Interest rate level, on average	1.9%	2.0%	2.0%	2.4%	2.7%	3.0%	3.3%	3.7%	3.9%	4.1%
Interest coverage ratio	530%	502%	454%	386%	348%	351%	318%	292%	284%	278%
Return on EPRA NRV	13.4%	14.5%	18.6%	19.6%	25.8%	18.2%	10.5%	10.4%	7.5%	9.1%
Return on total capital	7.5%	8.4%	10.6%	10.1%	11.9%	10.0%	6.5%	6.4%	5.3%	6.2%
Return on equity	13.1%	14.5%	22.6%	20.6%	20.1%	21.7%	9.5%	14.6%	13.5%	6.6%
Investments in properties, MSEK	5,158	6,112	5,292	6,488	31,491	3,553	2,525	1,768	2,798	2,015
Sales, MSEK	891	4,138	2,635	875	6,754	1,140	3,054	687	253	107
Loan-to-value ratio	44%	43%	45%	47%	50%	49%	49%	51%	52%	50%
Data per share (since there are no potential shares, there is no dilution effect)
Average number of shares, thousand	273,628	273.201	273,201		273,201 234,540	189,014	189,014	189,014	189,014	189,014
Income from prop. mgmt., SEK	12.35	11.52	10.81	9.26	8.80	8.11	7.67	7.12	6.64	6.21
Income from prop. mgmt. after tax (EPRA EPS), SEK	11.25	10.44	9.65	8.39	8.26	7.84	7.17	6.97	6.31	6.08
Earnings after tax, SEK	20.52	20.68	27.28	21.51	21.20	15.24	6.41	9.03	7.79	3.76
Number of shares outstanding, thousand	277,093	273.201	273,201	273,201	273,201	189,014	189,014	189,014	189,014	189,014
Property value, SEK	372	348	326	297	259	221	199	200	192	179
Net reinstatement value (EPRA NRV), SEK	214	195	176	153	133	112	99	93	87	84
Net tangible assets (EPRA NTA), SEK	205	187	169	146	131	109	97	91	86	83
Net disposal value (EPRA NDV), SEK	168	154	139	117	101	83	72	69	64	59
Dividend, SEK (2020 proposed)	6.90	6.50	6.10	5.30	5.00	4.25	3.99	3.69	3.43	3.21
Dividend payout ratio	56%	56%	56%	57%	57%	52%	52%	52%	52%	52%
Property-related key metrics
Rental value, SEK/sq. m.	1,538	1,495	1,407	1,341	1,304	1,095	1,064	1,036	1,015	995
Economic occupancy rate	93.1%	93.8%	94.4%	92.5%	92.2%	91.4%	90.0%	89.6%	90.1%	90.8%
Property costs, SEK/sq. m.	369	384	378	364	376	316	307	307	298	300
Property value, SEK/sq. m.	23,549	22,363	20,417	18,268	16,558	12,282	11,118	10,285	9,916	9,835

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 33.

	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Average number of shares, thousand (related to financial key metrics)	275,197	273,201	273,628	273,201
Number of shares outstanding, thousand (related to balance sheet key metrics)	277,093	273,201	277,093	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.

	Oct–Dec 2020		Oct–Dec 2019		Jan–Dec 2020		Jan–Dec 2019
	MSEK	SEK/ share	MSEK	SEK/ share	MSEK	SEK/ share	MSEK	SEK/ share
Income before tax	3,836	13.94	2,485	9.10	7,028	25.68	6,765	24.76
Reversed:
Acquisition costs	25	0.09	—	—	25	0.09	9	0.03
Financing fees, etc. for acquisitions	70	0.25	—	—	70	0.26	—	—
Goodwill, impairment	—	—	—	—	—	—	179	0.66
Change in values on properties	–3,047	–11.07	–1,413		–5.17 –3,863	–14.12	–3,918	–14.34
Change in values on derivatives	–92	–0.33	–306	–1.13	120	0.44	111	0.41
= Income from property management	792	2.88	766	2.80	3,380	12.35	3,146	11.52
EPRA Earnings (Income from property management after tax)
Income from property management	792	2.88	766	2.80	3,380	12.35	3,146	11.52
Reversed: Current tax, income from property management	–46	–0.17	9	0.04	–302	–1.10	–293	–1.08
EPRA Earnings/EPRA EPS	748	2.72	775	2.84	3,080	11.25	2,853	10.44

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 NAV 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.

		31 Dec 2020		31 Dec 2019
	MSEK	SEK/ share	MSEK	SEK/ share
Equity according to the balance sheet	48,243	174	43,777	160
Reversed:
Derivatives according to the balance sheet	1,132	4	715	3
Goodwill attributable to deferred tax	–1,480	–5	–1,480	–5
Deferred tax according to the balance sheet	11,367	41	10,153	37
Net reinstatement value (EPRA NRV)	59,271	214	53,165	195
Deduction:
Goodwill due to acquisition of United Spaces	–193	–1	–211	–1
Estimated real liability, deferred tax, 4%*	–2,284	–8	–1,925	–7
Net tangible assets (EPRA NTA)	56,793	205	51,029	187
Reversed:
Derivatives according to above	–1,132	–4	–715	–3
Deferred tax	–9,091	–33	–8,228	–30
Net disposal value (EPRA NDV)	46,570	168	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.

Interest coverage ratio	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Income from property management	792	766	3,380	3,146
Reversed:
Net interest costs	205	186	786	782
Income from property management excl. net interest	997	952	4,166	3,928
Interest coverage ratio	486%	512%	530%	502%
Loan-to-value ratio			31 Dec 2020	31 Dec 2019
Interest-bearing liabilities			45,720	40,826
Cash and cash equivalents			–161	–173
Net interest-bearing liabilities			45,559	40,653
Investment properties			103,042	95,168
Acquired properties not taken into possession			—	–304
Divested properties still in Castellum's possession			–220	3
Net investment properties			102,822	94,867
Loan-to-value ratio			44%	43%
Net debt to EBITDA			31 Dec 2020	31 Dec 2019
Interest-bearing liabilities			45,720	40,826
Cash and cash equivalents			–161	–173
Net interest-bearing liabilities			45,559	40,653
Net operating income			4,335	4,113
Central administration expenses			–149	–163
Operating income			4,186	3,950
Net debt to EBITDA			10.9	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.

Net investments	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Acquisitions	2,329	561	2,646	3,350
New construction, extensions and reconstructions	712	701	2,512	2,762
Total investments	3,041	1,262	5,158	6,112
Net sales prices	–770	–29	–891	–4,138
Net investments	2,271	1,233	4,267	1,974
Proportion of the property value, %	2%	1%	4%	2%

Other Financial Key Metrics

	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Surplus ratio	70%	70%	74%	72%
Interest rate level, on average	1.9%	1.9%	1.9%	2.0%
Net debt to EBITDA	11.4	10.5	10.9	10.3
Return on EPRA NRV	34.3%	26.2%	13.4%	14.5%
Return on total capital	14.9%	9.8%	7.5%	8.4%
Return on equity	27.6%	19.3%	13.1%	14.5%
Property value, SEK/share	372	348	372	348
Gross lettings	179	146	644	411
Net lettings	48	12	239	-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.

The 2021 AGM

Proposed dividend

Ahead of the Annual General Meeting (AGM) on March 25, 2021, the Board of Directors proposes a dividend of SEK 6.90 per share, divided into two instalments of SEK 3.45 each, which corresponds to an increase of 6% year-on-year. The proposed record date for the first payment is 29 March 2021, and the proposed record date for the second payment is 27 September 2021.

Nomination Committee proposals

The Nomination Committee for Castellum, appointed in accordance with the resolution by the 2020 AGM, consists of Patrik Essehorn, (chairman), appointed by Rutger Arnhult through his company; Vincent Fokke, appointed by Stichting Pensioenfonds ABP; Magnus Strömer, appointed by Länsförsäkringar Fonder; Christina Tillman, appointed by Corem Property Group; and Chairman of the Board Charlotte Strömberg.

The company has not yet received any complete proposal from the Nomination Committee prior to the AGM. However, the company has been informed that the Nomination Committee proposes Rutger Arnhult as Chairman of the Board of Castellum. Nomination Committee members Vincent Fokke and Charlotte Strömberg have declared that they do not support this proposal and have made reservations against the proposal, and announced that they intend to submit an alternate proposal for the composition of the Board. Charlotte Strömberg has declined re-election at the AGM.

Gothenburg, 22 January 2021

Henrik Saxborn

CEO, Castellum AB

This Year-End 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 Friday, 22 January 2021 at 8:00 am CET.

Board of Directors

Charlotte Strömberg Chairman of the Board

Per Berggren Board member

Anna Karin Hatt Board member

Christer Jacobson Board member

Christina Karlsson Kazeem Board member

Nina Linander Board member

Zdravko Markovski Board member

Joacim Sjöberg Board member

Events after balance sheet date

Castellum initiated the voluntary share exchange and cash offer pertaining to all shares in Entra that are not already owned by Castellum. The shareholders entitled to do so can accept the Offer between 8 January and 6 February 2021 (with reservation for extension).

The Castellum share

The Castellum share is listed on Nasdaq Stockholm Large Cap. At the end of the period the company had approximately 85,000 shareholders. The ten individual largest owner constellations confirmed as of 31 December 2020 are presented in the table below.

SHAREHOLDERS, 31 DEC 2020
Shareholders	Number of shares, thousand	Percentage of voting rights and capital
Rutger Arnhult	49,400	17.8%
APG Asset Management	16,145	5.8%
BlackRock	13,503	4.9%
Vanguard	8,356	3.0%
Länsförsäkringar Fonder	7,884	2.9%
Handelsbanken Fonder & Liv	7,729	2.8%
AMF Pension & Fonder	6,991	2.5%
Norges Bank	6,565	2.4%
Lannebo Fonder	5,640	2.0%
Swedbank Robur Fonder	3,698	1.3%
Board and Executive Manage ment Castellum	177	0.1%
Other shareholders registered in Sweden	62,742	22.6%
Shareholders registered abroad	88,263	31.9%
Total shares outstanding	277,093	100.0%
Repurchase of own shares	170
Total shares registered	277,263

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 31 December 2020, the company's holding of treasury shares amounted to 170,203 shares corresponding to 0.06% of the number of shares registered.

During the fourth quarter, a share issue in kind of 4,061,745 shares was carried out in conjunction with the acquisition of a property group in Helsinki, Finland.

Share price and share turnover

The Castellum share price as of 31 December 2020 was SEK 208.70 (222.0), equivalent to a market capitalisation of SEK 58 billion (60), calculated on the number of shares outstanding.

Since the beginning of the year a total of 286 million (270) shares were traded, equivalent to an average of 1,137,000 shares (1,080,000) per day, corresponding on an annual basis to a turnover rate of 104% (99). 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) totalled SEK 214 per share (195). The share price at the end of the year was thus 98% (114) of EPRA NRV.

Earnings

Income from property management per share, less tax attributable to income from property management (EPRA EPS) amounted to SEK 11.25 (10.44) on a rolling annual basis. This results in a share price return of 5.4% (4.7) corresponding to a multiple of 19 (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 20.52 per share (20.68), which from the share price gives a yield of 9.8% (9.3), corresponding to a P/E ratio of 10 (11).

Dividend yield

The proposed dividend of SEK 6.90 (6.50) corresponds to a dividend yield of 3.3% (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, including dividend, was –2% (39).

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 changes in value 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, 31 DEC 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 3,380		3,380	3,380
Change in values on properties (on average 10 years)	3.3%	2.3%	4.3%
NOI MSEK	3,141	2,189	4,092
Current tax, 10%	–356	–356	–356
Earnings after tax	6,165	5,213	7,116
Earnings, SEK/share	22.25	18.81	25.68
Return on EPRA NRV	11.6%	9.8%	13.4%
Earnings/share price	10.7%	9.0%	12.3%
P/E ratio	9	11	8

EPRA KEY RATIOS
	31 Dec 2020	31 Dec 2019
EPRA Earnings (Income from property mgmt after tax paid), MSEK	3,080	2,853
EPRA Earnings (EPS), SEK/share	11.25	10.44
EPRA NAV, MSEK	59,271	53,165
EPRA NRV, SEK/share	214	195
EPRA NTA, MSEK	56,793	51,029
EPRA NTA, SEK/share	205	187
EPRA NDV, MSEK	46,570	42,086
EPRA NDV, SEK/share	168	154
EPRA Vacancy rate	7%	7%
EPRA Cost ratio incl. costs for vacancy	24%	26%
EPRA Cost ratio excl. costs for vacancy	23%	24%
EPRA Return	4.8%	5.0%
EPRA "Topped-up" Yield	4.9%	5.2%

GROWTH, YIELD AND FINANCIAL RISK
	1 year	3 years avg./year	10 years avg./year
Growth
Rental income SEK/share	4%	5%	3%
Income from property management, SEK/share	7%	10%	7%
Net income for the year after tax SEK/share	neg.	neg.	7%
Dividend SEK/share	6%	9%	8%
Long-term EPRA NRV, SEK/share	10%	12%	10%
Property portfolio SEK/share	6%	8%	8%
Change in values on properties	3.9%	4.8%	3.3%
Return
Return on EPRA NAV	13.4%	15.6%	14.7%
Return on equity	13.1%	17.6%	16.7%
Return on total capital	7.5%	9.5%	8.3%
Total return on the share (incl. dividend)
Castellum	–1.6%	18.7%	14.4%
Nasdaq Stockholm (SIX Return)	14.8%	14.0%	11.4%
Real Estate Index Sweden (EPRA)	–4.3%	19.2%	16.0%
Real Estate Index Europe (EPRA)	–10.0%	2.5%	8.5%
Real Estate Index Eurozone (EPRA)	–7.4%	1.0%	8.0%
Real Estate Index Great Britain (EPRA)	–15.9%	–1.5%	7.1%
Financial risk
Loan-to-value ratio	44%	44%	48%
Interest coverage ratio	530%	486%	375%

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 31 DECEMBER 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 NAV

Net income after tax with reversed change in values on derivatives and deferred tax as a percentage of initial EPRA NAV. 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 103 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 4.4 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.

Beyond expectations. www.castellum.se

Financial calendar

Annual report 2020	15 February 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

The release date for the 2020 Annual Report has been pushed back from 8 February 2021 to 15 February 2021 as a result of the work on the ongoing public takeover offer submitted for the Norwegian property company Entra ASA.

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.

Invitation to Annual General Meeting 2020

The Annual General Meeting (AGM) of shareholders in Castellum AB (publ) will be held on Thursday, 25 March 2021.

In light of the ongoing coronavirus pandemic, and in order to reduce the risk of the spread of infection, it is expected that the AGM will be held solely through advance voting (postal voting) pursuant to temporary legislation, with no physical attendance. Shareholders wishing to attend the AGM must be registered as shareholders in the share register kept by Euroclear Sweden AB by Wednesday, 17 March 2021 and must also have registered their participation with the company in accordance with the instructions that will be provided in the notice to attend.

The notice to attend the AGM will be issued on or about 17 February 2021 and will be available through www.castellum.com as well as other methods. Castellum's Annual Report and other documents to be presented at the AGM will also be available on the website at that time. The notice to attend will include the items to be addressed at the AGM as well as information on how to register for participation.

For shareholders wishing to be represented by proxy, the company will provide a proxy form, which will be available on www.castellum.com. Shareholders with nominee registered shares must temporarily register such nominee shares in their own name in the share register in order to have the right to participate in the AGM. Voting rights that are registered by the second banking day after Wednesday, 17 March 2021 at the latest will be taken into account in conjunction with the presentation of the share register.

Shareholders have the right to have matters addressed at the coming AGM. For practical reasons, such requests should be submitted as soon as possible so that the company receives them by Thursday, 4 February 2021 at the latest. Requests should be addressed to Castellum AB, Attn: Henrik Saxborn, Box 2269, SE-403 14 Gothenburg, Sweden.

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