Castellum — Interim / Quarterly Report 2021

Jul 16, 2021

Nordic platform in office and logistics

Q2

HALF-YEAR REPORT JANUARY–JUNE 2021

A strong half-year and increased pace of investment

Important events during the quarter

During the period, Castellum acquired 18,470,976 shares in Entra at an average price of NOK 207 per share. After the acquisition, Castellum holds 33,470,976 shares, corresponding to 18.4% of shares and votes in Entra.

Castellum signed a declaration of intent with the Port of Gothenburg regarding the joint development of the Halvorsäng district into one of the Nordic region's leading logistics hubs. The project will be conducted in a partner company in which Castellum and the port own equal shares. Castellum will invest approximately SEK 1 billion in the project.

Castellum acquired land in the best logistics location in Malmö for the purpose of building a state-of-the-art warehouse and terminal facility for Budbee. The investment amounts to approximately MSEK 94.

Castellum's 30,000 sq. m. solar cell installation on the roof of the Hisingen Logistics Park received the Solar Energy Award, which is presented by the Solar Energy Association of Sweden. The installation is part of the company's 100% on Solar initiative, which means that one hundred solar cell installations will be constructed on Castellum properties through 2025.

Important events after the close of the period

At the beginning of July, Castellum acquired and occupied 22 properties in Finland with an annual rent of about SEK 0.6 billion for approximately SEK 6.5 billion, of which nine properties with a value corresponding to SEK 2.1 billion were resold.

Furthermore, Castellum has acquired two office properties in Stockholm for SEK 2 billion – one property in Solna Strand comprising approximately 21,500 sq. m. with occupancy at the beginning of September, and one property in the expansive Järva Krog area in Solna comprising approximately 12,600 sq. m. with occupancy at the beginning of July.

Front page: Castellum's coworking company United Spaces has six facilities in Stockholm, including Torsgatan 26, where this picture was taken. United Spaces also has operations in Uppsala, Gothenburg and Malmö, and has a total of nine facilities.

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

• Income for the period January–June 2021 totalled MSEK 2,936 (2,999).
• Income from property management amounted to MSEK 1,615 (1,689), equivalent to SEK 5.88 (6.18) per share – a decrease of –5%.
• Change in value on properties amounted to MSEK 3,122 (418) and on derivatives to MSEK 117 (–209).
• Net income for the period amounted to MSEK 5,550 (1,534), corresponding to SEK 20.20 (5.62) per share.
• Long-term net reinstatement value (EPRA NRV) amounted to SEK 227 per share (199), an increase of 14%.
• Net investments amounted to MSEK –8,986 (1,378) of which MSEK 335 (292) pertained to acquisitions, MSEK 1,679 (1,205) to new construction, extensions and reconstructions, and MSEK 11,000 (119) to sales.
• Net lettings for the period were MSEK 66 (200).

	KEY METRICS

	2021 Apr–June	2020 Apr–June	2021 Jan–June	2020 Jan–June	2020 Jan–Dec
Income, MSEK	1,434	1,523	2,936	2,999	6,004
Net operating income (NOI), MSEK	1,015	1,132	2,034	2,170	4,335
Income from property management, MSEK	836	895	1,615	1,689	3,380
NOI SEK/share	3.06	3.28	5.88	6.18	12.35
NOI growth	–7%	+10%	–5%	+9%	+7%
Net income after tax, MSEK	1,710	1,052	5,550	1,534	5,615
Net investment, MSEK	0	735	–8,986	1,378	4,267
Net lettings, MSEK	26	101	66	200	239
Loan-to-value ratio1)	38%	41%	38%	41%	41%
Interest coverage ratio	567%	561%	532%	529%	530%
EPRA NRV, SEK/share	227	199	227	199	214
EPRA NTA, SEK/share	219	190	219	190	205
EPRA NDV, SEK/share	185	156	185	156	168

1. The definition of loan-to-value ratio has been amended to adapt the key metric to investment in financial assets (Entra holding). The new definition is net interest-bearing liabilities in relation to total assets. The comparative figures have been restated.

Robust efforts continue

I left the Annual General Meeting of Castellum on 21 March 2013 as the company's newly appointed CEO. As you already know, I will be stepping down from my position at the beginning of October, so this will be my last comments as CEO of Castellum.

And while it is imperative for all companies to look forward, I hope you can indulge me as I take a brief look back at these eight intensive years. In figures, Castellum achieved the following during the 2013–2021 period:

Percentage on average per year

Income from property management, SEK/share, growth	+8%
Dividend SEK/share, growth	+9%
Net asset value, SEK/share, growth	+12%
Total return, Castellum share	+17.5%
Total property value	+14%
Number of shareholders	+31%1)

1. During the period Q2 2013–Q2 2021, the number of shareholders increased from 10,100 to approximately 89,000.

The loan-to-value ratio was also reduced from 54% to 39% during this period. It is true that we have not reported the highest total return among all our Nordic colleagues, but our strategy has been based on low risk by comparison with the sector, which has been a promise to – and been appreciated by – our shareholders.

The promise has, among other things, meant that:

• To grow and consistently deliver a higher dividend in line with growth in income from property management, while ensuring a moderate risk level.
• Increased density and quality in the portfolio.
• Global sustainability leader in the sector back in my first CEO comment, one of the headings was "Sustainability leads to profitability."
• One of the largest producers of offices and logistics properties in the Nordic region.

The single largest transaction was the acquisition of Norrporten, which granted us access to the city centres of Stockholm and Copenhagen, for example, as well as adding a new and significant customer segment, public sector properties. Furthermore, major positive capital gains were created on the parts of the portfolio that were resold for the purpose of financing the transaction and streamlining the portfolio.

Castellum today – a Nordic platform

To link to the present, the investments made this year – including the transactions completed in July – have consolidated Castellum's position as a Nordic platform for property investments. Over the past six months, nearly SEK 4 billion has been invested in Norway (Entra) and SEK 4.5 billion in Finland, mainly in Helsinki. Of the Finnish acquisition for a gross amount of SEK 6.5 billion, a number of properties have been resold for SEK 2 billion to increase the concentration on Helsinki.

Other investments include two large office properties in Stockholm for approximately SEK 2 billion and a strategically important joint venture with the Port of Gothenburg, which will entail further investments of SEK 1 billion. Other ongoing Castellum projects of approximately SEK 7 billion can be added to this figure. Based on the current market situation, these projects will enable further project gains of approximately SEK 1.8 billion.

Of our property value of approximately SEK 114 billion (including our stake in Entra's property value of approximately SEK 10 billion) after the acquisitions, Sweden accounts for 80%, Norway for 9%, Finland for 6% and Denmark for 5%.

For investors, Castellum represents a particularly attractive investment option in offices and logistics in the Nordic region. Castellum has both the competence and financial capacity for growth moving forward, and contributes to risk diversification, sustainability and a high degree of liquidity in an international property portfolio.

"We have had one of the strongest halfyear earnings in the company's history. Moreover, investments during the year have consolidated Castellum's position as a Nordic platform and made the company an interesting investment option in offices and logistics in the Nordic region.

Increasing net asset value, decreasing loan-to-value

In terms of earnings for the first six months of the year, we can once again confirm that the pandemic had barely any effect on our profit.

Net lettings amounted to a strong MSEK 66. Income from property management declined by 5%, which is due in its entirety to the major divestments totalling SEK 10 billion carried out at the beginning of the year. The newly acquired properties will make a positive contribution during the remainder of the year. The robust property market contributed to major positive value adjustments of approximately SEK 3 billion.

Combined, this yielded one of the strongest half-year earnings on record, SEK 5.6 billion.

Close to the largest port in the Nordic region and with access to large test areas for fossil-free vehicles of the future on land and in the air, the area around Säve airport has enormous development potential. This is why Castellum has now chosen to call the area Gateway Säve. In addition to sustainable mobility, Gateway Säve is being developed as a leading logistics hub in Scandinavia.

Over the course of one year, the net asset value increased by SEK 28 per share to SEK 227 while the loan-to-value ratio fell to 38.6% (41.8) during the same period. Even after the above-mentioned significant investments, the loan-to-value ratio will be comfortably below 45%.

Better second half of the year

The major investments made during the year will have a positive impact on income from property management and bring us back to the level prior to the divestments – but with a portfolio that will be of a higher quality and a stronger basis for continued growth moving forward.

Regardless of how the year ends, both the board and I are convinced that Castellum's financial strength will be able to provide the scope for a continued increase in the dividend for the 24th consecutive year.

Many thanks!

In conclusion, I would like to thank all of my dedicated colleagues who I have worked tirelessly with through all these years. I would also like to express my gratitude for the trust placed in me by shareholders, business contacts, customers and municipalities.

Henrik Saxborn CEO

Market comments

Swedish, Danish and Finnish economies

Economic performance in the first half of 2021 accelerated substantially compared with the negative performance during most of 2020. The majority of financial commentators now feel that the economic recovery will continue in 2021. Nonetheless, unemployment in Sweden is expected to rise slightly (to approximately 8.7% in 2021) to subsequently fall to just over 7% in 2022. Sweden's GDP for full-year 2020 fell nearly 3% but is expected to rise drastically and peak (+4.2%) in 2021, after which growth is predicted to decline somewhat to +3.7% in 2022 (Riksbank, July 2021). Low interest rates and very robust monetary policy and fiscal measures have continued play a part in supporting the financial markets.

The development of the Swedish krona exchange rate has a substantial role in the inflation trend in Sweden – a weak exchange rate normally contributes to higher inflation. In 2021 to date, the krona has traded within a relatively narrow range – 10–10.25 against EUR – after having strengthened in the second half of 2020. According to the Riksbank (July 2021), inflation – expressed in terms of CPIF – was +0.5% in 2020 and is expected to rise to approximately +1.8% in 2021 and +1.7% in 2022.

Following a negative 2020, the Danish and Finnish economies have also recovered substantially as a result of finance policy measures and the favourable effects of a highly expansive monetary policy. The primary scenario for Denmark is that GDP will increase 3.7% in 2021 and 3.7% in 2022 while unemployment will decrease. It is believed that the inflation rate will end up at +1.3% in 2021 and +1.5% in 2022 (Danmarks Nationalbank, June 2021).

In Finland, it is believed that GDP will increase by 2.9% in 2021 and 3.0% in 2022 while unemployment will decrease. It is believed that the inflation rate in 2021 will be +1.7% (Bank of Finland, June 2021).

MACRO INDICATORS – SWEDEN

Unemployment	9.1%	May 2021
Rate of inflation	1.8%	(May 2021 compared with May 2020)
GDP growth	0.8%	Q1 2021 compared with Q4 2020

Source: Statistics Sweden

Rental market

In the locations where Castellum conducts operations, the market has shown resilience to the ongoing pandemic with stable market rents.

In Stockholm and Malmö, office vacancy rates increased somewhat in the respective CBDs. Over the short term, the offering of new construction will remain limited and primarily let in advance.

Some pressure has been noted in the Gothenburg CBD rental market owing to large new production volumes.

In the Helsinki CBD, slightly higher office vacancy rates were noted during the quarter. Strong demand has spread from the CBD to the surrounding areas. However, there is a high vacancy rate in secondary areas and properties.

A slight increase in the office vacancy rate was also noted in the Copenhagen CBD during the quarter. A high level of access to land is a limiting factor for rent potential.

The rental market in Sweden for warehouses/logistics spaces was positive during the period, with stable to rising rents in prime logistics locations, particularly in semi-central locations with good means of transportation and sorting yards (last-mile locations).

Interest and credit market

In December 2019, Sweden's Riksbank raised interest rates from –0.25% to zero. The Riksbank's latest repo-rate path (July 2021) still indicates that the repo rate will remain at zero through at least the end of 2024.

Swedish long-term interest rates (expressed here as a fiveyear swap rate) have ranged between +0.1% and +0.4% to date this year, which does not differ greatly from the trend in 2020. At the end of the first quarter of 2021, the level was +0.4%, which was approximately 30 basis points higher than at the end of the preceding year. Current levels remain historically very low.

In the first half of 2021, access to financing – primarily in the euro market, but to some extent also in the Swedish capital market – has been excellent despite a tendency in the offering of property-related borrowing to continue to increase. Credit spreads remained relatively stable to date this year and are at historically advantageous levels for borrowers, though lending

conditions in the property sector have not improved to the same extent as for most other sectors.

In Denmark, the CIBOR 3m rate remained in the range of –0.2% to –0.25% during the first half of the year. EURIBOR 3m was also stable during the first half of the year, at –0.55%.

Property market

The volume for transactions over MSEK 40 in the transaction market in Sweden is estimated to have amounted to approximately SEK 150 billion (~81) over 345 transactions (212) in the first half of 2021.

Sentiment among investors in the Swedish property market was strong during the period, and there is a great deal of interest in and plenty of capital for property investments. Several transactions took place at strong levels during the latest quarter.

The share of foreign investors in the first half of 2021 was approximately 14% (29). The Nordic property market remains attractive to international investors.

In Castellum's markets, the required yield for office properties was either stable or fell during the period. The number of comparison transactions since the outbreak of the coronavirus pandemic has been limited for some sub-markets, but most transactions were conducted at strong levels in the latest quarter.

Warehouse and logistics properties continue to attract domestic and international investors, driven by the growth of e-commerce. The short supply of attractive logistics properties, in combination with high demand, has resulted in falling required yields.

In Denmark, the transaction volumes totalled approximately DKK 41 billion (~24) in the first half of 2021. The mood among investors remains strong. The required yield for offices in the CBD is assessed as remaining stable at 3.5%.

In Finland, the transaction volumes totalled approximately EUR 2.2 billion (~2.6) in the first half of 2021. Among investors, there is considerable demand for the most attractive objects, and the required yield for offices in the CBD in Helsinki is estimated at 3.4%, which is roughly on a par with Stockholm.

In all, this shows a strong property market that indicates a great deal of resistance to the negative effects of the pandemic.

Castellum's agenda for the sustainable city

KEY METRICS – SUSTAINABILITY	2021 Q2	2020	2019	2018	2017	Targets
Resource efficiency
Total energy use, kWh per sq. m., year	85	75	88	97	94
Total energy use, degree-day corrected, kWh per sq. m., year	90	87	95	103	100	Max 93 kWh/m2 2021, and 87 kWh/m2 2025 (15% reduction 2025 cf. with 2015)
1. of which actual heating	60	50	60	64	64
2. of which normalised heating	65	62	67	70	70
3. of which electricity and cooling	25	25	28	33	30
Energy savings per year in the like-for-like portfolio, rolling 12 months, %	–3%	–12%	–8%	3%	–6%	1.5% energy savings/year in the like-for-like portfolio
Total water use, m3 per sq. m., year	0.2	0.3	0.3	0.3	0.3
Water savings per year in the like-for-like portfolio, rolling 12 months, %	–17%	–13%	–3%	–1%	–4%	1% water conservation/year in the like-for-like portfolio
Fossil-free
Share of non-fossil energy	96%	95%	96%	95%	95%	100% fossil-free energy by 2030
Fossil fuel-free vehicles, %	100%	100%	86%	62%	34%	100% fossil fuel-free vehicles
No. of charging posts for electric vehicles	718	—	—	—	—	New measurement point, 2021
No. of large solar cell facilities installed	40	39	26	22	16	100 solar cell installations by 2025
Road map to climate neutrality by 2030
Property management – CO2 emissions in kg per square metre, year (market based)1)	1.2	1.0	1.5	1.2	1.7	1.2 kg/sq. m. 2021 and 0 kg/sq. m. 2030
of which scope 1	0.1	0.1	0.1	0.2	0.3
of which scope 2 – market-based	1.1	0.9	1.4	1.0	1.4
of which scope 2 – location-based	4.4	4.1	8.8	11.3	11
Project Development – Reduced emissions in project development portfolio (scope 3), %	–15%	—	—	—	—	New target from 2021. 15% reduction in CO2 emissions/sq. m. in new production of offices
Environmental certification
Environmental certification, % of sq. m.	44%	39%	36%	33%	29%	50% certified area by 2025
Environmental certification, no. of properties	181	202	164	141	129
Environmental certification, % of rental income	57%	52%	47%	43%	39%
Environmental certification, % of property value	61%	55%	51%	48%	43%
ESG benchmarks
GRESB points (0–100)	TBD	91	92	92	95	Marks for 2021 will be received first during Q3–Q4 2021
DJSI points (0–100)	TBD	81	79	73	72	Marks for 2021 will be received first during Q3–Q4 2021
CDP mark (A to D-)	TBD	A	A–	B	A–	Marks for 2021 will be received first during Q3–Q4 2021
Social key metrics
Sick leave, % (long-term and short-term)	2.1%	2.2%	2.9%	3.8%	2.0%	Max 2% short-term and 3% long-term sick leave
Equality, % women and men	42%/58%	40%/60%	39%/61%	42%/58%	38%/62%	Between 40–60%
Diversity, international background, %	8%	8%	6%	6%	No measurement	20% 2025
Apprentices, % of employees	2%	2%	5%	6%	4%	4% per year

Castellum will be one of the most sustainable property companies in Europe. The company's sustainability agenda, "The sustainable city," is divided into four areas of focus: The Planet, Future-Proofing, Well-Being and Social Responsibility. These areas of focus ensure that operations are conducted responsibly, creating long-term solutions from an economic, ecological and social perspective.

For more detailed information, refer to Castellum's Annual Report for 2020.

1. 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 2020 Annual Report on page 168. Total energy consumption is the sum of 1 and 3. Total normalised energy use is the sum of 2 and 3.

CERTIFIED PROPERTIES, EXCLUDING PROJECTS AND LAND

MSEK	Offices	Public sector properties	Warehouse/ Logistics	Light industry	Retail	Total	Share of property management portfolio
Rental income	887	344	165	15	96	1,507	57%
Direct property costs	–187	–56	–28	–2	–11	–284	51%
of which
1. Operating costs	–94	–30	–21	–2	–4	–151	46%
2. Maintenance	–16	–6	–2	0	–2	–26	44%
3. Property tax	–77	–20	–5	0	–5	–107	63%
Net operating income	700	288	137	13	85	1,223	59%
Property value	34,380	12,391	6,165	480	2,938	56,354	61%
New construction, extensions and reconstructions	180	50	50	1	20	301	44%
Lettable area, 1,000 sq. m.	803	347	338	25	108	1,621	46%
No. of properties	82	28	33	6	18	167	33%

EU TAXONOMY – PRELIMINARY GUIDANCE, FIRST HALF OF 2021

MSEK	EPC A	EPC B	EPC C	Total	Share of property management portfolio
Rental income	106	314	673	1,093	41%
Direct property costs	–18	–60	–136	–214	38%
of which
1. Operating costs	–10	–32	–79	–121	36%
2. Maintenance	–1	–5	–13	–19	33%
3. Property tax	–7	–23	–44	–74	44%
Net operating income	88	254	537	879	42%
Property value	3,240	11,899	22,600	37,739	41%
New construction, extensions and reconstructions	14	23	136	173	25%
Lettable area, 1,000 sq. m.	133	416	943	1,492	42%
No. of properties	14	54	119	187	37%

Castellum continued to receive international recognition for its sustainability efforts. The awards are proof of the company's strong position in sustainability, creating continued drive for leading development in the industry.

Environmental certifications and the EU Taxonomy

Certified properties pertains to the portfolio held at the end of the period as if they have been owned for the entire period. Moreover, land and development properties have been excluded. The same method has been applied to the figures of the EU Taxonomy.

As regards the EU Taxonomy, only preliminary data is presented to provide guidance based on Castellum's current knowledge of which key metrics will govern investment properties. For buildings constructed prior to 31 December 2020, it has been brought to the company's attention that the governing criteria are expected to be Energy Performance Certificate (EPC) ratings A or that the building has a primary energy use among the top 15% of the most energy efficient in the country. In Sweden, all buildings with A, B and occasionally C ratings are assessed as being among the top 15% of the most energy-efficient, which is why properties with A, B and C ratings are regarded as green assets under the EU Taxonomy in our preliminary guidance. For buildings with an EPC rating of C, Castellum has assumed a limit value of a calculated primary energy consumption of lower than 100 kWh per square metre and year if these are to be included in the top 15%.

For new production built after 31 December 2020, the requirement is 10% better than nearly zero-energy buildings (NZEB), which means 10% better than the energy requirement under the building regulations of the National Board of Housing, Building and Planning (BBR in Swedish), which in turn speaks for the fact that the absolute majority of Castellum's new production going forward will meet EU Taxonomy requirements. This is provided that all Do No Significant Harm (DNSH) criteria have been met. Based on current knowledge, this means that under the Taxonomy it will be easier for new production to meet the criteria than for an existing building according to the manner in which the current EPC ratings levels are designed in Sweden.

Castellum has assumed that all rental income, investment and operating costs that are associated with a given economic activity have the same classification as the economic activity. If, for example, a property has the "green" classification under the EU Taxonomy, all rental income, investment and operating costs will also be classified as green.

Condensed consolidated statement of comprehensive income

MSEK		2021 Apr–June	2020 Apr–June	2021 Jan–June	2020 Jan–June	Rolling 4 quarters July 2020–June 2021	2020 Jan–Dec
Rental income		1,299	1,370	2,672	2,715	5,395	5,438
Service income		95	121	195	221	428	454
Coworking income		40	32	69	63	118	112
Income	Note 2	1,434	1,523	2,936	2,999	5,941	6,004
Operating costs	Note 3	–150	–146	–379	–330	–703	–654
Maintenance expenses	Note 3	–33	–28	–64	–62	–147	–145
Property tax	Note 3	–92	–92	–186	–183	–374	–371
Coworking expenses	Note 3	–47	–32	–82	–68	–134	–120
Lettings and property administration expenses	Note 3	–97	–93	–191	–186	–384	–379
Net operating income		1,015	1,132	2,034	2,170	4,199	4,335
Central administrative expenses	Note 3	–39	–38	–77	–75	–151	–149
Acquisition costs	Note 4	—	—	—	—	–25	–25
Net financial items	Note 5
Net interest costs		–179	–194	–374	–394	–766	–786
Dividend		46	—	46	—	46	—
Financing fees, etc. for acquisitions		—	—	—	—	–70	–70
Letting cost/Site leasehold fee		–7	–5	–14	–12	–22	–20
Income from property management incl. acquisition costs/financing costs1)	Note 1	836	895	1,615	1,689	3,211	3,285
Income from property management		836	895	1,615	1,689	3,306	3,380
Changes in value	Note 6
Properties		1,515	415	3,122	418	6,567	3,863
Financial holdings		–195	—	296	—	296	—
Impairment of goodwill		–53	—	–53	—	–53	—
Derivatives		98	–42	117	–209	206	–120
Income before tax		2,201	1,268	5,097	1,898	10,227	7,028
Current tax	Note 7	–109	–40	–132	–82	–297	–247
Deferred tax	Note 7	–382	–176	585	–282	–299	–1,166
Net income for the period/year		1,710	1,052	5,550	1,534	9,631	5,615
Other comprehensive income
Items that can be reclassified to net income for the period
Translation difference of currencies, etc.		–64	–387	91	28	–153	–216
Change in values on derivatives, currency hedge		14	209	–22	–66	88	44
Comprehensive income for the period/year2)		1,660	874	5,619	1,496	9,566	5,443
Average number of shares, thousand		273,405	273,113	274,783	273,157	274,422	273,628
Earnings, SEK/share		6.25	3.85	20.20	5.62	35.10	20.52

COMPARISONS SHOWN IN BRACKETS

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 the previous year.

1. For calculation, refer to Financial Key Metrics, page 22.

2. Net income and comprehensive income for the period/year are assignable in their entirety to the Parent Company's shareholders.

Accounting policies can be found on page 26.

Performance analysis, January – June 2021

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–June 2021 amounted to MSEK 1,615 (1,689), corresponding to SEK 5.88 per share (6.18) – a change of –5%. Income from property management, rolling four quarters, amounted to MSEK 3,306 (3,292), equivalent to SEK 12.05 per share (12.05).

SEGMENT INFORMATION

		Income	Income from property management
MSEK	2021 Jan–June	2020 Jan–June	2021 Jan–June	2020 Jan–June
Central	798	799	454	460
West	624	685	368	404
Öresund	593	627	333	374
Stockholm–North	773	800	503	512
Finland	79	25	18	12
Coworking	69	63	–15	–8
Total	2,936	2,999	1,661	1,754

The difference between the income from property management of MSEK 1,661 (1,754) above and the Group's reported income before tax of MSEK 5,097 (1,898) consists of unallocated income from property management of MSEK –46 (–65), change in value on financial holdings MSEK 296 (—), change in values on properties of MSEK 3,122 (418), impairment of goodwill of MSEK –53 (—) and change in values on derivatives of MSEK 117 (–209).

Note 2 Income

The Group's income totalled MSEK 2,936 (2,999). Rental income includes discounts of MSEK 55 (60) as well a lump sum of MSEK 15 (5) as a result of early termination of leases.

The average economic occupancy rate was 93.1% (93.9). Moreover, the coworking company United Spaces generated income of MSEK 69 (63) in the period.

Rental income in the like-for-like portfolio increased 1.0%, which was due to higher rents but also to lower discounts.

DEVELOPMENT OF INCOME

MSEK	2021 Jan–June	2020 Jan–June	Change, %
Like-for-like portfolio	2,435	2,410	+1.0%
Development properties	161	166
Transactions	271	360
Coworking	69	63
Income	2,936	2,999	–2.1%

INCOME FROM PROPERTY MANAGEMENT PER SHARE

Note 3 Costs

Direct property costs totalled MSEK 629 (575), corresponding to SEK 317/sq. m. (273). For the like-for-like portfolio, property costs increased 6%, which is primarily attributable to higher costs for heating, electricity and snow removal as a consequence of a colder half-year compared with the previous year. In addition, costs for coworking totalled MSEK 82 (68).

Property administration totalled MSEK 191 (186), corresponding to SEK 108 per square metre (90).

Central administrative expenses were MSEK 77 (75). Central administrative expenses also included costs related to the earnings and share price-related incentive plans for members of Executive Management of MSEK 3 (4).

COST TRENDS

MSEK	2021 Jan–June	2020 Jan–June	Change, %
Like-for-like portfolio	511	483	+5.8%
Development properties	43	32
Transactions	75	60
Direct property costs	629	575	+9.4%
Coworking	82	68
Property administration	191	186
Central administration	77	75
Total costs	979	904	+8.3%

Consumption for heating during the period has been calculated to 97% (80) 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	232	190	131	144	122	188
Maintenance expenses	41	36	18	30	27	33
Property tax	138	99	27	31	75	96
Property costs	411	325	176	205	224	317
Lettings & prop. admin.						108
Total	411	325	176	205	224	425
NOI Q2 2020	376	325	141	153	232	363

Note 4 Acquisition costs

The fourth quarter of 2020 was charged with acquisition costs of MSEK 25 attributable to Castellum's attempt to acquire the listed Norwegian property company Entra. The transaction was not completed, however, which was announced in February 2021.

Note 5 Net financial items

Net interest was MSEK –374 (–394). The average interest rate over the period was 1.9% (2.0). Net interest was positively affected by approximately MSEK 23 due to the 0.1 percentage point decrease in the average interest rate. Furthermore, costs for leases amounted to MSEK 14 (12), of which site leasehold fees were MSEK 12 (9). During the second quarter, a dividend of MSEK 46 (—) was received from the Entra holding.

Note 6 Changes in value

Interest in property investments remained high while access to capital is good, which has resulted in a stable and strong property market.

Castellum recognised an unrealised change in value of MSEK 2,575 (299), which is attributable to a changed yield requirement mainly for warehouse/logistics and project gains/building rights. Moreover, a realised change in value of MSEK 547 (119) was recognised, primarily comprising the sale of 92 properties to Blackstone.

Castellum owns approximately 18% of the listed Norwegian property company Entra. The holding is measured at fair value, which resulted in an unrealised change in value of MSEK 296 (—) during the period.

During the second quarter, a property in Denmark was divested, entailing an impairment of goodwill of MSEK –53 (—).

The value of the derivatives changed by MSEK 117 (–209), mainly due to changes in long-term market interest rates.

CHANGE IN VALUES ON PROPERTIES

MSEK	2021 Jan–June	2020 Jan–June
Cash flow	–76	97
Project gains/building rights	625	224
Required yield	2,006	–27
Acquisitions	20	5
Unrealised changes in value	2,575	299
%	2.7%	0.3%
Sales	547	119
Total	3,122	418
%	3.3%	0.4%

Note 7 Tax

Recognised tax totalled MSEK 453 (–364), of which MSEK –132 (–82) is current tax. 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 463 (464). Furthermore, there are untaxed reserves of MSEK 830 (563). Fair values for the properties exceed their fiscal value by MSEK 59,015 (57,417) of which MSEK 6,982 (6,577) relates to the acquisition of properties accounted for on the acquisition date as asset acquisitions. Full nominal tax on the net from these items less the deferred tax attributable to the asset acquisitions – that is, MSEK 10,794 (10,493) – is recognised as a deferred tax liability.

Castellum has no ongoing tax disputes.

TAX CALCULATION 30 JUNE 2021

MSEK	Basis current tax	Basis deferred tax
Income from property management	1,615
Non-deductible interest	—
Deductions for tax purposes
depreciation	–553	553
reconstructions	–182	182
Transfers to tax allocation reserve	–212	212
Other tax adjustments	114	129
Taxable income from property management	782	1,076
current tax if tax loss carry forwards not utilised	161
Sales of properties	—	–6,633
Change in values on properties	—	2,575
Taxable income before tax loss carry forwards	782	–2,982
Tax loss carry forwards, opening balance	–603	603
Tax loss carry forwards, closing balance	463	–463
Taxable income	642	–2,842
Tax according to the income statement for the period	–132	585

NET DEFERRED TAX LIABILITY 30 JUNE 2021

MSEK	Basis	Nominal tax liability	Real tax liability
Tax loss carry forwards	463	95	95
Untaxed reserves	–830	–171	–171
Properties	–59,015	–12,157	–2,126
Total	–59,382	–12,233	–2,202
Properties, asset acquisitions	6,982	1,439	—
In the balance sheet	–52,033	–10,794	—

Deferred tax is in principle both interest-free and amortisation-free, and can therefore be considered as shareholders' 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 net estimated real 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 20.6%, 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.

Condensed Consolidated Balance Sheet

MSEK		30 June 2021	30 June 2020	31 Dec 2020
ASSETS
Investment properties	Note 8	97,250	97,012	103,042
Goodwill	Note 9	1,620	1,670	1,673
Leases, right-of-use	Note 10	1,035	910	888
Financial assets	Note 11	6,566	—	2,729
Other fixed assets		205	182	200
Current receivables		2,409	1,104	1,223
Cash and cash equivalents		997	200	161
Total assets		110,082	101,078	109,916
Equity and liabilities
Equity		50,926	43,469	48,243
Deferred tax liability	Note 7	10,794	10,493	11,376
Other provisions		10	5	3
Interest-bearing liabilities	Note 12	43,023	41,834	45,720
Derivatives		653	863	1,132
Lease liability	Note 10	1,035	910	888
Non-interest bearing liabilities		3,641	3,504	2,554
Total equity and liabilities		110,082	101,078	109,916
Pledged assets (pledged mortgages)		22,573	19,768	21,231
Pledged assets (chattel mortgages)		—	—	—
Contingent liabilities		—	—	—

Note 8 Property portfolio and property value

Investment properties

The property portfolio is located in growth areas in Sweden as well as Copenhagen and Helsinki. The properties' locations vary from city centre locations to well-situated business districts with good means of communication and services.

Investments

During the period, investments totalling MSEK 2,014 (1,497) were carried out, of which MSEK 335 (292) were acquisitions and MSEK 1,679 (1,205) new construction, extensions and reconstructions. After sales and cash settlements of MSEK 11,000 (119), net investments amounted to MSEK –8,986 (1,378).

After the close of the period, Castellum acquired two properties in Stockholm for approximately SEK 2 billion and a property portfolio in Finland for approximately SEK 4.4 billion net.

CHANGES IN THE PROPERTY PORTFOLIO

	Fair value, MSEK	Number
Property portfolio on 1 January 2021	103,042	642
+ Acquisitions	335	10
+ New construction, extensions and reconstructions	1,679	—
– Sales	–10,453	–94
+/– Unrealised changes in value	2,575	—
+/– Currency translation	72	—
Property portfolio on 30 June 2021	97,250	558

Condensed Changes in Equity

MSEK	Number shares outstanding, thousand	Share capital	Other capital contribution	Currency translation reserve	Currency hedge reserve	Non-controlling interest	Retained	earnings Total equity
Equity, 31 Dec 2019	273,201	137	12,434	366	–316	–2	31,158	43,777
Dividend, March and Sep 2020 (SEK 6.50/share)	—	—	—	—	—	—	–1,776	–1,776
Repurchase of own shares	–170	—	—	—	—	—	–28	–28
Net income, Jan–June 2020	—	—	—	—	—	—	1,534	1,534
Other comprehensive income, Jan–June 2020	—	—	—	28	–66	—	—	–38
Equity, 30 June 2020	273,031	137	12,434	394	–382	–2	30,888	43,469
Repurchase of own shares	—	—	—	—	—	—	—	—
Share issue in kind	4,062	2	825	—	—	—	—	827
Net income, July–Dec 2020	—	—	—	—	—	—	4,081	4,081
Other comprehensive income, July–Dec 2020	—	—	—	–244	110	—	—	–134
Equity, 31 Dec 2020	277,093	139	13,259	150	–272	–2	34,969	48,243
Dividend, March and Sep 2021 (SEK 6.50/share)	—	—	—	—	—	—	–1,898	–1,898
Repurchase of own shares	–5,018	—	—	—	—	—	–1,038	–1,038
Net income, Jan–June 2021	—	—	—	—	—	—	5,550	5,550
Other comprehensive income Jan–June 2021	—	—	—	91	–22	—	—	69
Equity, 30 June 2021	272,075	139	13,259	241	–294	–2	37,583	50,926

Note 8 cont.

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 2,600 (1,750) 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 at year-end. In addition, 25% of the holdings by value are externally assessed at the end of the half-year accounting period. The external valuations amounted to SEK 24.8 billion at the end of the period, while Castellum's valuation of the corresponding portfolio was SEK 25.0 billion – a difference of SEK 200 million, corresponding to 0.8%.

Based on these internal valuations, property value at the end of the period was assessed at MSEK 97,250 (103,042), corresponding to SEK 25,998 (23,549) 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 4.8% (5.0).

AVERAGE VALUATION YIELD

(excl. projects/land and building rights)	MSEK
Net operating income, properties	2,086
+ Real occupancy rate, 94% at the lowest	119
+/– Property costs at annual rate	48
– Property admin, SEK 30/sq. m.	–57
Normalised net operating income (6 months)	2,196
Valuation (excl. building rights of MSEK 907)	90,973
Average valuation yield	4.8%

Valuation yield per category	30 June 2021 31 Dec 2020
Offices	4.7%	4.9%
Public sector properties	4.7%	4.8%
Warehouse/Logistics	4.9%	5.2%
Retail	5.8%	5.5%
Light industry	5.3%	5.9%
Total	4.8%	5.0%

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 +/– 5–10% means a range in value of the property portfolio of MSEK 92,388–102,112, equivalent to +/– MSEK 4,862.

PROPERTY-RELATED KEY METRICS

	2021 Jan–June	2020 Jan–June	2020 Jan–Dec
Rental value, SEK/sq. m.	1,629	1,533	1,538
Economic occupancy rate	93.1%	93.9%	93.1%
Property costs, SEK/sq. m.	425	363	369
Net operating income, SEK/sq. m.	1,073	1,050	1,039
Property value, SEK/sq. m.	25,998	22,541	23,549
No. of properties	558	636	642
Lettable area, thousand sq. m.	3,801	4,284	4,447
Average valuation yield	4.8%	5.1%	5.0%

NET INVESTMENTS PER REGION

Accessy opens doors with a mobile phone

We are finally able to truly make life easier for tenants and ourselves. With Accessy in your mobile phone, you no longer need to carry a bundle of keys in your pocket and a plastic card hanging around your neck.

Accessy is a digital platform whereby the property owner can easily allocate access, rights and authorisation to locked spaces such as offices, meeting rooms, premises or apartments. Functionality is also improved as is security with better control of who has entered a property and when.

Since January, the service has been in large-scale operation at Castellum's coworking company United Spaces' recently opened arenas at Torsgatan 26 in Stockholm and Rådhuset in Uppsala. Today, more than 250 members have a digital key in their mobile phone that can easily open entrance doors and other parts of the workplace. The service is available through an app and will be implemented in Castellum's properties and United Spaces' arenas in 2021.

Castellum's property portfolio

	30 June 2021				January – June 2021
Category	Number	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	33	323	16,450	50,900	410	2,537	90.9%	369	74	459	295
West	63	360	11,234	31,207	333	1,848	89.6%	302	64	355	238
Central	77	536	11,321	21,131	431	1,611	91.9%	392	100	371	292
Öresund	25	218	5,824	26,699	209	1,919	92.8%	189	41	377	148
North	2	5	103	20,506	4	1,618	97.1%	4	1	467	3
Denmark	15	148	4,628	31,249	153	2,061	92.6%	137	38	516	99
Finland	7	58	2,758	47,419	79	2,707	93.8%	71	21	710	50
Total Office	222	1,648	52,318	31,739	1,619	1,964	91.5%	1,464	339	411	1,125
PUBLIC SECTOR PROPERTIES
Stockholm	9	61	3,363	54,686	83	2,689	98.4%	80	12	385	68
West	11	77	1,593	20,653	52	1,360	91.3%	47	9	226	38
Central	30	283	7,874	27,865	248	1,756	96.5%	238	50	355	188
Öresund	8	86	3,086	35,948	89	2,080	98.5%	88	13	303	75
North	10	100	2,102	20,985	76	1,510	97.1%	75	14	286	61
Denmark	1	12	620	51,305	15	2,535	98.6%	15	2	404	13
Total Public sector properties	69	619	18,638	30,095	563	1,820	96.7%	543	100	325	443
WAREHOUSE/LOGISTICS
Stockholm	20	119	2,960	24,936	78	1,320	94.3%	72	12	199	60
West	53	445	6,339	14,242	196	881	92.5%	176	37	166	139
Central	18	101	1,082	10,741	41	803	86.3%	35	9	172	26
Öresund	22	119	1,543	13,015	55	919	92.4%	49	10	175	39
Denmark	1	18	164	8,968	7	811	76.5%	6	3	288	3
Total Warehouse/Logistics	114	802	12,088	15,084	377	940	91.9%	338	71	176	267
RETAIL
Stockholm	23	131	3,207	24,470	107	1,636	98.8%	103	13	199	90
West	11	50	1,097	21,741	38	1,507	97.5%	37	3	128	34
Central	22	118	1,909	16,247	77	1,317	97.5%	74	15	256	59
Öresund	12	51	944	18,627	39	1,538	87.7%	33	8	309	25
Total Retail	68	350	7,157	20,467	261	1,496	96.6%	247	39	224	208
LIGHT INDUSTRY
Stockholm	11	40	748	18,955	24	1,204	96.4%	23	5	257	18
West	11	39	485	12,347	17	865	95.1%	16	3	157	13
Central	8	23	317	13,584	11	997	97.9%	11	3	222	8
Öresund	1	13	129	9,722	6	856	83.7%	5	1	163	4
Total Light industry	31	115	1,679	14,554	58	1,007	95.1%	55	12	205	43
Total investment properties	504	3,534	91,880	25,998	2,878	1,629	93.1%	2,647	561	317	2,086
Lettings and property administration expenses									191	108	–191
Total after lettings and property administration									752	425	1,895
Projects	36	267	4,785	—	68	—	—	45	18	—	27
Undeveloped land	18	—	585	—	—	—	—	—	—	—	—
Total	558	3,801	97,250	—	2,946	—	—	2,692	770	—	1,922

PROPERTY VALUE BY REGION

This table 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 1,922 reported above and the net operating income of MSEK 2,034 in the income statement is explained both by the deduction of the net operating income of MSEK 127 in properties sold during the period, by the MSEK 2 upward adjustment of the net operating income on properties acquired/completed during the period, which are recalculated as if they had been owned or been completed during the entire period, and the exclusion of MSEK –13 from the coworking company in the table above.

A more detailed description about property categories is available on page 30, Definitions.

Customers

Customer and lease structure

Castellum's lease portfolio features a good risk exposure. The Group has approximately 5,300 commercial leases and approximately 400 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 4%. This means that Castellum's exposure to credit risk from a

LEASE MATURITY STRUCTURE, 30 JUNE 2021

MSEK	No. of leases	Lease value, MSEK	Percentage of value
Commercial, term
2021	776	78	1%
2022	1,593	849	16%
2023	1,184	1,038	20%
2024	979	909	18%
2025	390	608	11%
2026+	399	1,656	31%
Total commercial	5,321	5,138	97%
Residential	443	42	1%
Parking spaces and other	5,752	110	2%
Total	11,516	5,290	100%

LEASE SIZE 30 JUNE 2021

Lease size, MSEK	No. of leases	Share	Lease value, MSEK	Share
Commercial
<0.25	2,590	23%	187	3%
0.25–0.5	851	7%	314	6%
0.5–1.0	791	7%	560	11%
1.0–3.0	738	6%	1,262	24%
>3.0	351	3%	2,815	53%
Total	5,321	46%	5,138	97%
Residential	443	4%	42	1%
Parking spaces and other	5,752	50%	110	2%
Total	11,516	100%	5,290	100%

single customer is very low. The remaining average length of contract was 3.9 years (3.9).

Gross lettings (i.e. the annual value of total lettings) during the period was MSEK 266 (355), of which MSEK 58 (198) pertained to lettings in conjunction with new construction, extensions and reconstructions. Notices of termination amounted to MSEK 200 (155), of which bankruptcies were

NET LETTINGS JAN–JUNE 2021

	Region
MSEK	Central	West	Öresund Sthlm North			Finland Total
New lettings
Existing prop.	69	42	37	49	1	10	208
Investments	4	43	11	0	0	0	58
Total	73	85	48	49	1	10	266
Notices of termination
Existing prop.	–53	–56	–33	–45	–5	–4	–196
Bankruptcies	–4	0	0	0	0	0	–4
Total	–57	–56	–33	–45	–5		–4 –200
Net lettings	16	29	15	4	–4	6	66
NOI Q2 2020	52	4	134	6	1	3	200

NET LETTINGS

MSEK 4 (1) and MSEK 42 (9) were notices of termination with more than 18 months left of contract. Net lettings for the period were thus MSEK 66 (200). 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.

COMMERCIAL LEASES DISTRIBUTED BY SECTOR

Public sector 26%

• Commercial services, consultants 20%
• Industrial durables and services 9%
• Retail incl. wholesales 9%
• IT: software, hardware and services 9%
• Automotive: sales, services and manufacturing 5%
• Healthcare 5%
• Bank, finance and insurance 5%
• Hotel, restaurants and leisure 4%
• Energy 3%
• Food: grocery stores and producers 2%
• Transport 1%
• Forestry 1%
• Real estate 1%

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. Åseby 1:5 GOTHENBURG

• ONGOING New construction, public sector prop. Investment: MSEK 301

1. Gamlestaden 22:14 GOTHENBURG • ONGOING Reconstruction, office Investment: MSEK 67

1. Heliumgasen 11 GOTHENBURG • ONGOING New construction, warehouse Investment: MSEK 69

1. Sesamfröet 2 GOTHENBURG • ONGOING

Reconstruction, public sector prop. Investment: MSEK 280

1. Götaland 5 JÖNKÖPING • ONGOING

New construction, public sector prop. Investment: MSEK 323

Reconstruction, public sector prop. Investment: MSEK 125

1. Jeppe 1/GreenHaus HELSINGBORG • ONGOING New construction, office Investment: MSEK 320

2. Sellerin 3 LUND

• COMPLETED New construction, warehouse Investment: MSEK 91

1. Bolaget 1/Lockarp

1. Godsfinkan 1 Investment: MSEK 94

New construction, public sector prop. Investment: SEK 1.3 billion

1. Sjustjärnan/E.ON MALMÖ

• ONGOING New construction, office Investment: SEK 1.3 billion

1. Örnäs 1:17 STOCKHOLM • ONGOING New construction, logistics Investment: MSEK 221

2. Sorbonne block/Infinity STOCKHOLM • ONGOING

New construction, office Investment: approximately SEK 1.7 billion

5

12

6

1

^{2 3}

New construction, office Investment: MSEK 118

18

13

10 11

7

^{8 9}

4

1. Korsningen 1 ÖREBRO • ONGOING New construction, public sector

prop. Investment: MSEK 227

14

Larger ongoing projects

LARGER ONGOING INVESTMENTS

No	1) Property	Category	Investment type	Location	Completed	Area, sq. m.	Rental value, MSEK	Econ. occup. July 2021	Total inv. incl. land, MSEK	Of which built up, MSEK	Remaining inv., MSEK
			New/
14	Dragarbrunn 21:1	Offices	reconstruction	Uppsala	Q4 2021	14,130	45	72%	493	362	131
17	Verkstaden 14	Public sector property	New construction	Västerås	Q1 2022	5,800	14	88%	198	130	68
18	Hissmontören 4	Offices	New construction	Örebro	Q1 2022	3,400	9	53%	118	42	76
2	Sörred 7:23	Warehouse	New construction	Gothenburg Q1 2022		6,220	7	100%	78	24	54
5	Heliumgasen 11	Warehouse	New construction	Gothenburg Q1 2022		4,440	6	100%	69	33	36
9	Jeppe 1/GreenHaus	Offices	New construction	Helsingborg Q2 2022		7,000	19	55%	320	269	51
19	Korsningen 1	Public sector property	New construction	Örebro	Q2 2022	5,650	15	100%	227	94	133
15	Örnäs 1:17	Logistics	New construction	Stockholm	Q2 2022	16,870	15	0%	221	65	156
4	Gamlestaden 22:14	Offices	Reconstruction	Gothenburg Q2 2022		4,610	5	100%	67	35	32
7	Götaland 5	Public sector property	New construction	Jönköping	Q3 2022	9,200	23	100%	323	93	230
6	Sesamfröet 2	Public sector property	Reconstruction	Gothenburg Q3 2022		5,600	24	100%	280	72	208
11	Bolaget 1/Lockarp	Logistics	New construction	Malmö	Q4 2022	5,135	5	100%	94	27	67
13	Sjustjärnan/E.ON	Offices	New construction	Malmö	Q1 2023	31,460	78	91%	1,296	535	761
12	Godsfinkan 1	Public sector property	New construction	Malmö	Q1 2023	26,500	81	91%	1,270	751	519
8	Bollbro 15	Public sector property	Reconstruction	Helsingborg Q1 2023		3,810	7	92%	125	34	91
1	Åseby 1:5	Public sector property	New construction	Gothenburg Q3 2023		14,780	21	100%	301	18	283
16	Sorbonne block/Infinity Offices		New construction	Stockholm	Q3 2025	19,800	100	0%	1,713	35	1,678
	Developments completed or fully/partly occupied
10	Sellerin 3	Warehouse	New construction	Lund	Q1 2021	5,190	7	40%	91	86	5
3	Backa 20:5	Warehouse	New construction	Gothenburg Q1 2021		4,600	7	100%	71	71	0
	Total developments, >MSEK 50					194,195	488	67%	7,355	2,776	4,579

1. Property numbers on the map on page 16.

Castellum has an ongoing development portfolio of approximately SEK 7.4 billion, of which SEK 2.8 billion is developed. The average economic occupancy rate in June 2021 is 67%.

These projects make possible project gains, based on current market yields, of SEK 2.6 billion, of which SEK 800 million has already been recognised. There is thus the possibility for future project gains of a further SEK 1.8 billion, given current pricing of various property types and that leases are signed.

Two projects were partially completed during the period, with occupation. At the same time, eight new projects were started, which corresponds to a total investment volume of approximately SEK 2.7 billion. During the second quarter, Castellum's single largest project commenced, Infinity in Hagastaden, Stockholm, with a total investment volume of approximately SEK 1.7 billion and scheduled completion in 2025. Furthermore, SEEL's establishment at Gateway Säve commenced during the period, a new production of 14,778 square metres at an investment of approximately MSEK 300. This is an investment that fits in well with Gateway Säve's strategy as a development hub for sustainable transportation in combination with future logistics. Moreover, Castellum has begun new production of a logistics property in Stockholm for approximately MSEK 218 for the purpose of meeting the rental market's strong demand.

Castellum has a large volume of building rights – approximately 1.5 million square metres of lettable area. Castellum believes it will be possible to start approximately 900,000 square metres of this over the next four years, corresponding to an investment volume of approximately SEK 20 billion. Out of this volume, approximately 550,000 square metres are logistics and the rest primarily offices. The geographic distribution and the 20 largest projects by area are shown in the following table.

POTENTIAL DEVELOPMENT PROJECTS, 2021–2025

		Lettable area, sq. m.
Location	Category	Detailed dev. plan exists	Change to detailed dev. plan required
Gothenburg Logistics		—	444,000
Gothenburg Offices		—	25,000
Gothenburg Other		17,700	9,000
Helsingborg Logistics		22,000	—
Jönköping	Offices	25,220	6,000
Jönköping	Other	8,000	—
Copenhagen Logistics		7,300	—
Linköping	Offices	4,000	8,400
Linköping	Other	—	10,000
Lund	Offices	17,200	—
Malmö	Offices	6,200	30,000
Malmö	Logistics	24,000	—
Norrköping Offices		14,900	—
Stockholm	Offices	8,700	120,000
Stockholm	Logistics	43,100	—
Stockholm	Other	—	7,600
Uppsala	Offices	—	14,400
Uppsala	Logistics	4,000	—
Västerås	Offices	—	13,900
Örebro	Offices	17,200	1,700
Helsinki	Offices	9,600	—
Total		229,120	690,000

Projects	Location	Type	Category	Detailed dev. plan	Lettable area, sq. m.
Säve Stage 2		Gothenburg New construction	Logistics	Ongoing	255,000
Säve Stage 1		Gothenburg New construction	Logistics	Ongoing	189,000
North of Nordstaden1) Gothenburg New construction			Offices	Ongoing	25,000
Charkuteristerna 1-8	Stockholm	New construction	Offices	Ongoing	25,000
Hälsingland 19	Malmö	New construction	Offices	Not begun	25,000
Långeberga		Helsingborg New construction	Logistics	In effect	21,800
Werket	Jönköping	Reconstruction	Offices	In effect	20,200
Lindetorp	Stockholm	New construction	Offices	Ongoing	20,000
Forskaren	Lund	New construction	Offices	In effect	17,200
Vallonsmidet, Stage 1	Stockholm	New construction	Offices	Ongoing	16,000
Hornsberg 10	Stockholm	Reconstruction	Offices	Ongoing	13,000
Sunnanå 8:51	Malmö	New construction	Logistics	In effect	13,000
Brunna Örnäs 1:28	Stockholm	New construction	Logistics	In effect	12,700
Brunna Örnäs 1:29	Stockholm	New construction	Logistics	In effect	12,700
Tistlarna 9	Malmö	New construction	Logistics	In effect	10,970
Boländerna 9:1	Uppsala	Reconstruction	Offices	Ongoing	10,895
Amasonen 3	Linköping	New construction	Offices	Ongoing	10,000
Brunna Tibble 1:648	Stockholm	New construction	Logistics	In effect	10,000
Viitta	Helsinki	New construction	Offices	In effect	9,600
Öskaret Stage 3	Stockholm	Reconstruction	Offices	Ongoing	9,500
Total					726,565

POTENTIAL CONSTRUCTION START 2021–2025, LARGEST

1. Land allocation agreement

Note 9 Goodwill

Castellum has goodwill of MSEK 1,620 (1,673), of which MSEK 193 (193) is attributable to the acquisition of the coworking company United Spaces in 2019. The remaining goodwill of MSEK 1,427 (1,480) comprises deferred tax from the acquisition in 2016 of the companies CORHEI and Norrporten. A writeoff 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. Goodwill was amortised in the amount of MSEK 53 during the period as the result of divestments in Denmark.

Note 10 Leases

Castellum values its leases and recognises the right-of-use as an asset with a corresponding liability. At the balance sheet date, the value of Castellum's leases was MSEK 1,035 (888), divided into site leasehold agreements of MSEK 483 (483) and rental agreements in United Spaces, the coworking company, of MSEK 552 (405). The increase in United Spaces is due primarily to the takeover of three facilities from UMA Workspaces in Stockholm during the period.

Note 11 Financial assets

During the period, Castellum acquired 18,470,976 shares in Entra at an average price of NOK 207 per share. Total holdings in Entra at the balance sheet date were 33,470,976 shares, corresponding to 18.4%. The fair value of the holdings at the end of the period totalled MSEK 6,566, involving an unrealised change in value of MSEK 296 during the period.

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 61,574 (63,500), of which MSEK 44,582 (46,894) was long-term and MSEK 16,992 (16,606) was short-term. Of the utilised borrowing facilities at the end of the period, MSEK 31,332 (29,693) was long-term and MSEK 10,694 (15,866) short-term.

In the first half-year, new bank credit facilities of approximately MSEK 2,000 were entered into, approximately MSEK 840 were extended or renegotiated, and MSEK 2,430 were terminated. In the bond market, as part of its Swedish MTN program, Castellum issued new bonds with a nominal amount of MSEK 2,550 while bonds with a nominal value of MSEK 2,580 has been repaid.

The proportion of secured financing used, with the addition of commercial paper outstanding backed by secured bank credit commitments, was 13% (16) of the properties' value.

Currency exposure

Castellum owns properties in Denmark and Finland with a value of MSEK 8,170 (9,091), which means that the Group is exposed to currency risk. The currency risk is primarily attributable to the translation of income statements and balance sheets in foreign currency into Swedish kronor.

CREDIT MATURITY STRUCTURE, 30 JUNE 2021

		Utilised in
Credit agreements	MSEK	Bank	MTN/Comm. paper	Total Share, %
0–1 year	16,992	–177	10,870	10,694	25%
1–2 years	10,410	11	6,499	6,510	16%
2–3 years	12,086	879	6,807	7,686	18%
3–4 years	5,550	11	3,539	3,550	9%
4–5 years	7,721	1,461	3,310	4,771	11%
>5 years	8,815	3,350	5,466	8,815	21%
Total	61,574	5,535	36,491	42,026	100%

INTEREST RATE MATURITY STRUCTURE, 30 JUNE 2021

Maturity date	MSEK2)	Share, %	Average interest rate, %1)	Average fixed interest rate term
0–1 year	18,862	45%	1.75%	0.2
1–2 years	3,499	8%	0.93%	1.5
2–3 years	4,892	12%	2.40%	2.4
3–4 years	2,296	6%	1.38%	3.5
4–5 years	999	2%	1.49%	4.4
5–10 years	11,478	27%	1.50%	8.6
Total	42,026	100%	1.66%	3.2

1. Including fees for utilised credit agreements and exchange rate differences for MTNs. 2. Calculated on the net volume of interest-bearing liabilities and derivatives.

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.

DISTRIBUTION OF INTEREST-BEARING FINANCING, 30 JUNE 2021

Bonds MSEK 29,189 (70%) Commercial papers MSEK 7,302 (17%) Bank loans MSEK 5,535 (13%)

SECURED CREDIT FACILITIES, 30 JUNE 2021

Unsecured credits MSEK 36,491 (87%) Secured credits MSEK 5,535 mkr (13%)

KEY METRICS – FINANCING

	30 June 2021	30 June 2020	31 Dec 2020
Net interest-bearing liabilities, MSEK	42,026	41,634	45,559
bonds outstanding, MSEK	29,189	26,989	29,127
commercial paper outstanding, MSEK	7,302	2,650	8,844
banking credit etc., MSEK	5,535	11,995	7,588
Unutilised credit facilities, MSEK	19,548	11,956	17,941
Share of unsecured assets	60%	60%	61%
Loan-to-value ratio1)	38%	41%	41%
Interest coverage ratio	532%	529%	530%
Net liability/EBITDA, multiple	10.7	9.9	10.9
Average debt maturity, years	3.7	3.6	3.8
Average credit price tenor, years	3.0	2.9	3.0
Average fixed interest rate term	3.2	3.1	2.6
Credit rating	Baa2, Stable Outlook	Baa2, Stable Outlook	Baa2, Stable Outlook
Average effective rate excl. pledges	1.66%	1.83%	1.69%
Average effective rate incl. pledges	1.81%	1.93%	1.82%
Market value interest rate derivatives	–354	–801	–740
Market value currency derivatives	–299	–62	–392

1. The definition of loan-to-value ratio has been amended to adapt the key metric to investment in financial assets (Entra holding). The new definition is net interest-bearing liabilities in relation to total assets. The comparative figures have been restated.

Loan-to-value ratio, Property, consists of the old definition, but remains as part of reporting as it constitutes a covenant.

CASTELLUM'S FINANCIAL POLICY AND COMMITMENTS IN CREDIT AGREEMENTS

	Policy	Commitment	Outcome
Loan-to-value ratio, Property	Not exceeding 50%	Not exceeding 65% 43%
Interest coverage ratio	At least 200%	At least 150%	532%
The share of secured borrowing/total assets		Not exceeding 45% 5%
Funding risk
• average debt maturity	At least 2 years		3.7 years
• proportion maturing within 1 year	No more than 30% of loans outstanding and unutilised credit agreements		18%
• 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		3.2 years
• maturing within 6 months	No more than 50%		42%
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

	2021	2020	2021	2020	Rolling 12 months July 2020–	2020
MSEK	Apr–June	Apr–June	Jan–June	Jan–June	June 2021	Jan–Dec
Net operating income	1,015	1,132	2,034	2,170	4,199	4,335
Central administrative expenses	–39	–38	–77	–75	–151	–149
Reversed depreciation	35	7	64	30	129	95
Net interest paid	–121	–190	–273	–325	–737	–789
Tax paid	–21	–6	–24	–5	–196	–177
Translation difference of currencies	–54	–104	91	–38	–5	–134
Cash flow from operating activities before change in working capital	805	801	1,815	1,757	3,239	3,181
Change in current receivables	–49	110	–280	–165	–193	–78
Change in current liabilities	–217	–116	–126	–55	–230	–159
Cash flow from operating activities	539	795	1,409	1,537	2,816	2,944
Investments in new construction, extensions and reconstructions	–991	–637	–1,679	–1,205	–2,986	–2,512
Property acquisitions	–158	–217	–335	–292	–1,862	–1,819
Change in liabilities at acquisitions of property	19	–4	146	–147	–11	–304
Sales of properties	1,121	119	11,000	119	11,772	891
Change in receivables at sales of properties	3,729	12	–906	–11	–1,112	–217
Investment in financial assets	–3,196		–3,802		–6,244	–2,442
Other investments	–15	9	–72	–17	–160	–105
Cash flow from investment activities	509	–718	4,352	–1,553	–603	–6,508
Change in long-term interest-bearing liabilities	352	–1,035	–2,779	947	1,619	5,345
Change in long-term receivables	–2	12	–3	12	–4	11
Swap termination	—	—	–156	—	–156	—
Repurchase of own shares	–655	–28	–1,038	–28	–1,038	–28
Dividend paid	–949	—	–949	–888	–1,837	–1,776
Cash flow from financing activities	–1,254	–1,051	–4,925	43	–1,416	3,552
Cash flow for the period/year	–206	–974	836	27	797	–12
Cash and cash equivalents, opening balance	1,203	1,174	161	173	200	173
Cash and cash equivalents, closing balance	997	200	997	200	997	161

Parent Company

CONDENSED INCOME STATEMENT

MSEK	2021 Apr–June	2020 Apr–June	2021 Jan–June	2020 Jan–June
Income	25	25	50	50
Costs	–51	–56	–109	–112
Net financial items	–28	–22	–30	0
Dividend	46	—	46	—
Impairment of shares in subsidiaries	–19	—	–19	—
Change in values on derivatives	119	56	103	–219
Change in value, financial investment	–195	—	296	—
Income before tax	–103	3	337	–281
Tax	8	7	3	13
Net income for the period/year	–95	10	340	–268
Items that will be reclassified into net income
Translation difference of currencies	–97	–156	–28	18
Unrealised change, currency hedge	83	156	46	–65
Comprehensive income for the period/year	–109	10	358	–315

CONDENSED BALANCE SHEET

MSEK	30 June 2021	30 June 2020	31 Dec 2020
Participations, Group companies	20,971	20,159	20,957
Receivables, Group companies	37,812	40,956	43,709
Financial assets	6,566	—	2,729
Other assets	107	112	114
Cash and cash equivalents	5	58	6
Total	65,461	61,285	67,523
Equity	15,806	15,556	18,384
Derivatives	653	863	1,132
Interest-bearing liabilities	41,291	39,067	43,318
Interest-bearing liabilities, Group companies	6,505	4,564	4,126
Other liabilities	1,206	1,235	563
Total	65,461	61,285	67,523
Pledged assets (receivables, Group contributions)	18,842	16,558	16,974
Contingent liability (guaranteed commitments for subsidiaries)	1,725	2,201	2,170

Opportunities and risks

Opportunities and risks in the cash flow

Risk and uncertainty factors regarding cash flow from operating activities are mainly attributable to changes in rental levels, vacancy rates and interest rates. The sensitivity analysis below shows how much a change of one percentage point affects cash flow and reported earnings.

SENSITIVITY ANALYSIS – CASH FLOW EFFECT ON INCOME, NEXT 12 MONTHS

	Effect on income, MSEK	Probable scenario
	±1% (points)	Boom	Recession
Rental level/index	+54 /–54	+	–
Vacancies	+59 /–59	+	–
Property costs	–15 /+15	–	0
Interest costs1)	–154 /+108	0	–
Valuation, required yield	–23,88 /+22,455	+	–

1. 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 earnings 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	–19,450	–9,725	—	9,725	19,450
Loan-to-value ratio	46%	42%	38%	35%	32%

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, the 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 2020 Annual Report, "Risk and risk management" on pages 66–73.

Coronavirus pandemic

As previously, COVID-19 continues to impact people and society, even though vaccinations are now under way and providing hope for the future. Castellum continues to receive inquiries from customers regarding liquidity relief, but to a limited extent. As previously, Castellum is concluding individual agreements where the transition from quarterly to monthly payments is and has undoubtedly been the most common solution.

The Swedish government has decided on renewed state rent support for the second and third quarters of 2021. As it did in 2020 and the first quarter of 2021, the support is aimed at especially vulnerable industries. The starting point of the support is that the property owner can grant a rent discount of up to 100% for the second and third quarters of 2021. The property owner can subsequently apply for compensation from the state of 50% of that 100%. Maximum compensation for tenants of the premises – at the Group level – is EUR 800,000 on this occasion also. However, anything the tenant previously collected in various forms of support as a consequence of COVID-19 is deducted from that ceiling amount.

Since the beginning of the pandemic, liquidity relief corresponding to quarterly rent of approximately MSEK 145 has been granted, the majority of which pertains to the switch from quarterly to monthly payments. MSEK 20 of this liquidity relief is active; the remaining MSEK 120 has returned to customary quarterly notification. Approximately MSEK 2 in discounts linked to the new state support for 2021 have been granted.

The billing for the second quarter has been paid to almost 100%, and Castellum's assessment is that the third quarter will follow the same payment patterns and share, indicating a strong and stable cash flow and a good customer base.

Financial Key Metrics

	Apr–June 2021	Apr–June 2020	Jan–June 2021	Jan–June 2020	Rolling 12 months July 20–June 21	Jan–Dec 2020
Average number of shares, thousand (related to income statement key metrics)	273,405	273,113	274,783	273,157	274,178	273,628
Number of shares outstanding, thousand (related to balance sheet key metrics)	272,075	273,031	272,075	273,031	272,075	277,093

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. These financial measurements should therefore not be seen as a substitute for metrics defined according to IFRS. Unless otherwise stated, the table below presents metrics, along with their reconciliation, which are not defined according to IFRS. Definitions for these measures appear on page 30.

Income from property management

	Apr–June 2021		Apr–June 2020 Jan–June 2021		Jan–June 2020		Rolling 12 months July 20–June 21		Jan–Dec 2020
	MSEK	SEK/ share	MSEK	SEK/ share	MSEK	SEK/ share	MSEK	SEK/ share	MSEK	SEK/ share	MSEK	SEK/ share
Income before tax	2,201	8.05	1,268	4.64	5,097	18.55	1,898	6.95	10,227	37.27	7,028	25.68
Reversed:
Acquisition costs	—	—	—	—	—	—	—	—	25	0.09	25	0.09
Financing fees, etc. for acquisitions	—	—	—	—	—	—	—	—	70	0.26	70	0.26
Change in values on properties	–1,515	–5.54	–415	–1.52	–3,122	–11.36	–418	–1.53	–6,567		–23.93 –3,863	–14.12
Change in value on financial holdings	195	0.72	—	—	–296	–1.07	—	—	–296	–1.07	—	—
Impairment of goodwill	53	0.19	—	—	53	0.19	—	—	53	0.19	—	—
Change in values on derivatives	–98	–0.36	42	0.16	–117	–0.43	209	0.76	–206	–0.76	120	0.44
= Income from property management	836	3.06	895	3.28	1,615	5.88	1,689	6.18	3,306	12.05	3,380	12.35
EPRA Earnings (Income from property management after tax)
Income from property management	836	3.06	895	3.25	1,615	5.88	1,689	6.18	3,306	12.05	3,380	12.35
Reversed: Current tax, income from property management	–78	–0.29	–95	–0.32	–161	–0.59	–165	–0.60	–297	–1.08	–300	–1.10
EPRA Earnings/EPRA EPS	758	2.77	800	2.93	1,454	5.29	1,524	5.58	3,009	10.97	3,080	11.25

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 carryforwards.

Net asset value

		30 June 2021				31 Dec 2020
		MSEK SEK/share		MSEK SEK/share	MSEK SEK/share
Equity according to the balance sheet	50,926	187	43,469	159	48,243	174
Reversed:
Declared, undistributed dividend	949	3	888	3	—	—
Derivatives according to the balance sheet		653 2	863	3	1,132	4
Goodwill attributable to deferred tax	–1,427	–5	–1,480	–5	–1,480	–5
Deferred tax according to the balance sheet	10,794	40	10,493	39	11,376	41
Net reinstatement value (EPRA NRV)	61,895	227	54,233	199	59,271	214
Deduction
Goodwill due to acquisition of United Spaces	–193	–1	–190	–1	–193	–1
Estimated real deferred tax, 4%1)	–2,202	–7	–2,090	–8	–2,284	–8
Net tangible assets (EPRA NTA)	59,500	219	51,953	190	56,793	205
Reversed:
Derivatives according to above	–653	–2	–863	–3	–1,132	–4
Deferred tax	–8,592	–32	–8,403	–31	–9,091	–33
Net disposal value (EPRA NDV)	50,255	185	42,687	156	46,570	168

1. The net estimated real deferred tax liability has been estimated at 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 20.6%, 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%. Net asset value describes the total equity that the company manages for its owners. Based on this equity, Castellum wants to create return and growth at a low level of risk. Net asset value can be calculated in different ways, where mainly time and turnover in the property portfolio impact on the value. Long-term net reinstatement value (EPRA NRV) is based on the balance sheet, with adjustments for items that will not lead to any short-term payment. In Castellum's case, these would include such items as goodwill, derivatives and deferred tax liability. Net tangible assets (EPRA NTA) is the same as EPRA NRV but with the difference that goodwill that is not attributed to deferred taxes is not seen as an asset. Furthermore, the deferred tax should be based on market value according to how the company has completed property transactions in recent years. Net disposal value (EPRA NDV) is equal to equity according to the balance sheet but with adjustment for goodwill.

Financial risk

Interest coverage ratio	Apr–June 2021	Apr–June 2020	Jan–June 2021	Jan–June 2020	Rolling 12 months July 20–June 21	Jan–Dec 2020
Income from property management, MSEK	836	895	1,615	1,689	3,306	3,380
Reversed:
Net interest costs, MSEK	179	194	374	394	766	786
Income from property management excl. net interest, MSEK	1,015	1,089	1,989	2,083	4,072	4,166
Interest coverage ratio, %	567%	561%	532%	529%	532%	530%
Loan-to-value ratio				30 June 2021	30 June 2020	31 Dec 2020
Interest-bearing liabilities, MSEK				43,023	41,834	45,720
Cash and cash equivalents, MSEK				–997	–200	–161
Net interest-bearing liabilities, MSEK				42,026	41,634	45,559
Total assets, MSEK				110,082	101,078	109,916
Loan-to-value ratio (%)				38%	41%	41%
Loan-to-value ratio, Property				30 June 2021	30 June 2020	31 Dec 2020
Net interest-bearing liabilities, acc. to above, MSEK		42,026	41,634	45,559
Investment properties, MSEK				97,250	97,012	103,042
Acquired properties not taken into possession, MSEK				–146	–157	—
Divested properties still in Castellum's possession, MSEK				1,126	14	220
Investment properties, MSEK				98,230	96,869	103,262
Loan-to-value ratio, Property, %				43%	41%	43%
Net debt to EBITDA				30 June 2021	30 June 2020	31 Dec 2020
Net interest-bearing liabilities, acc. to above, MSEK	42,026	41,634	45,559
Net operating income, MSEK				2,034	2,170	4,335
Central administration expenses, MSEK				–77	–75	–149
Operating income, MSEK				1,957	2,095	4,186
Net debt to EBITDA				10.7	9.9	10.9

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.

Investment

Net investment, MSEK	Apr–June 2021	Apr–June 2020	Jan–June 2021	Jan–June 2020	Rolling 12 months July 20–June 21	Jan–Dec 2020
Acquisitions	158	217	335	292	2,689	2,646
New construction, extensions and reconstructions	991	637	1,679	1,205	2,986	2,512
Total investments	1,149	854	2,014	1,497	5,675	5,158
Net sales prices	–1,121	–119	–11,000	–119	–11,772	–891
Net investments	28	735	–8,986	1,378	–6,097	4,267
Proportion of the property value, %	0%	1%	–9%	1%	–6%	4%

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.

Other key financial metrics

	Apr–June 2021	Apr–June 2020	Jan–June 2021	Jan–June 2020	Rolling 12 months July 20–June 21	Jan–Dec 2020
Surplus ratio	73%	76%	69%	74%	72%	74%
Interest rate, average	1.86%	1.9%	1.90%	2.0%	1.90%	1.9%
Return on EPRA NRV	15.4%	17.6%	12.2%	7.4%	16.0%	13.4%
Return on total capital	8.3%	5.9%	19.5%	9.9%	10.2%	7.5%
Return on equity	13.8%	9.9%	23.7%	7.2%	22.7%	13.1%
Property value, SEK/share	357	355	357	355	357	372
Gross lettings, MSEK	127	170	266	355	555	644
Net lettings, MSEK	26	101	66	200	105	239

Events after balance sheet date

At the beginning of July, Castellum acquired and occupied 22 properties comprising approximately 237,000 square metres with an annual rent of about SEK 0.6 billion for approximately SEK 6.5 billion in Finland, of which nine properties with a value corresponding to SEK 2.1 billion were resold.

Furthermore, in July Castellum acquired two office properties in Stockholm each with a value of approximately SEK 1 billion, or a total of SEK 2 billion. This consisted of one property in Solna Strand comprising approximately 21,500 sq. m. with occupancy at the beginning of September, and one property in the expansive Järva Krog area in Solna comprising approximately 12,600 sq. m. with occupancy at the beginning of July.

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.

Signing of the Report

The Board of Directors and the CEO give their assurance that the half-year report provides a true and fair view of the Parent Company's and Group's operations, financial position and results and as well as the significant risks and uncertainties facing the Parent Company and companies within the Group.

Gothenburg, 15 July 2021

Rutger Arnhult	Per Berggren	Anna-Karin Celsing	Christina Karlsson Kazeem
Chairman of the Board	Board member	Board member	Board member
Anna Kinberg Batra	Zdravko Markovski	Joacim Sjöberg	Henrik Saxborn
Board member	Board member	Board member	CEO

This information is information that Castellum AB is obligated to make public pursuant to the EU Market Abuse Regulation and the Swedish Security Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 8:00 a.m. CEST on 15 July 2021.

Review report

Independent Auditor's Report on the review of half-year financial information To the Board of Directors of Castellum AB (publ) Corp. Reg. No. 556475-5550

Introduction

We have reviewed the half-year report for Castellum AB (publ) for the period 1 January–30 June 2021. The Board of Directors and the CEO are responsible for the preparation and presentation of this half-year report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of review

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

Conclusion

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

Gothenburg, 15 July 2021 Deloitte AB

Harald Jagner Authorised public accountant

The Castellum share

The Castellum share is listed on Nasdaq Stockholm Large Cap. At the end of the period the company had just below 89,000 shareholders. The ten individual largest owner constellations confirmed as of 30 June 2021 are presented in the table below.

SHAREHOLDERS AS OF 30 JUNE 2021

Shareholders	Number of shares, thousand	Percentage of voting rights and capital
Rutger Arnhult	65,656	24.1%
APG Asset Management	15,656	5.8%
BlackRock	13,592	5.0%
Vanguard	9,297	3.4%
Handelsbanken Fonder & Liv	8,569	3.2%
Länsförsäkringar Fonder	7,009	2.6%
Lannebo Fonder	5,000	1.8%
Swedbank Robur Fonder	4,028	1.5%
Folksam	3,831	1.4%
Szombatfalvy-sfären	3,487	1.3%
Board and Executive Management Castellum1)	135	0.0%
Other shareholders registered in Sweden	53,307	19.6%
Shareholders registered abroad	82,508	30.3%
Total shares outstanding	272,075	100.0%
Repurchase of own shares	5,188
Total shares registered	277,263

1. Rutger Arnhult's holdings are excluded under Board and Executive Management Castellum. 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 2021 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. During the period, 5,017,764 shares were repurchased at an average price of SEK 207. On 30 June 2021, the company's holding of treasury shares amounted to 5,187,967 shares corresponding to 2% of the number of shares registered.

Dividend yield

The recent AGM approved a dividend of SEK 6.90 per share (6.50) corresponding to a dividend yield of 3.2% (3.7) based on the share price at the end of the period. Of the dividend, SEK 3.45 was distributed in late March/early April, and the remainder will be disbursed in September.

Total return

During the last 12-month period, the total return on the Castellum share was 29% (1.7), including the dividend.

Net asset yield and earnings incl. 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. For a long-term player with a stable cash flow and a properly compiled property portfolio, the long-term change in value can be used to adjust the numerator in the equation.

DISTRIBUTION OF SHAREHOLDERS BY COUNTRY, 30 JUNE 2021

THE SHARE

	30 June 2021	30 June 2020	31 Dec 2020
Share price. SEK	217.8	174.05	208.70
Market capitalisation, SEK billion	60.4	47.6	57.9
Sales, millions	96	172	286
Turnover rate, %	71%	128%	104%

EPRA KEY RATIOS

	30 June 2021	30 June 2020	31 Dec 2020
EPRA Earnings (Income from property mgmt after tax paid), MSEK	1,454	1,524	3,080
EPRA Earnings (EPS), SEK/share	5.29	5.58	11.25
EPRA NRV (Long-term net reinstatement value), MSEK	59,498	54,233	59,271
EPRA NRV, SEK/share	227	199	214
EPRA NTA, MSEK	59,498	51,953	56,793
EPRA NTA, SEK/share	219	190	205
EPRA NDV, MSEK	50,253	42,687	46,570
EPRA NDV, SEK/share	185	156	168
EPRA Vacancy rate	7%	6%	7%
EPRA Cost ratio incl. costs for vacancy	27%	24%	24%
EPRA Cost ratio excl. costs for vacancy	26%	22%	23%
EPRA Yield	4.7%	5.0%	4.8%
EPRA "Topped-up" Yield	4.5%	5.1%	4.9%

GROWTH, YIELD AND FINANCIAL RISK

	1 year	3 years avg./year	10 years avg./year
Growth
Rental income SEK/share	2%	3%	4%
Income from prop. mgmt SEK/share	0%	7%	7%
Net income for the year after tax SEK/share	108%	19%	12%
Dividend SEK/share	6%	9%	8%
Long-term EPRA NRV, SEK/share	14%	13%	11%
Property portfolio SEK/share	1%	5%	7%
Change in values on properties	5.1%	5.1%	3.4%
Yield
Return on long-term EPRA NRV	16.0%	15.4%	19.7%
Return on equity	22.7%	18.2%	16.6%
Return on total capital	10.2%	8.9%	8.0%

Total return per share (incl. dividend)

Castellum	29.3%	18.5%	14.3%
Nasdaq Stockholm (SIX Return)	46.6%	20.3%	13.7%
Real Estate Index Sweden (EPRA)	41.0%	22.2%	17.9%
Real Estate Index Europe (EPRA)	25.0%	4.9%	8.6%
Real Estate Index Eurozone (EPRA)	19.9%	2.1%	7.8%
Real Estate Index Great Britain (EPRA)	22.7%	1.6%	6.6%
Financial risk

Loan-to-value ratio	38%	42%	47%
Interest coverage ratio	532%	510%	388%

NET ASSET YIELD AND EARNINGS INCL. LONG-TERM CHANGE IN VALUE

		Sensitivity analysis
		-1%-point	-1%-point
Income from prop. mgmt rolling 12 months	3,306	3,306	3,306
Change in values on properties (on average 10 years)	3.4%	2.4%	4.4%
NOI MSEK	3,307	2,334	4,279
Current tax, 12%	–186	–186	–186
Earnings after tax	6,427	5,454	7,399
Earnings, SEK/share	2,362	20.05	27.20
Return on EPRA NRV	11.9%	10.1%	13.6%
Earnings/share price	10.8%	9.2%	12.5%
P/E ratio	9	11	8

Share price trend

DIVIDEND YIELD

SHARE PRICE/NET ASSET VALUE

YIELD, EARNINGS PER SHARE

THE CASTELLUM SHARE'S PRICE TREND AND TURNOVER FROM THE IPO ON 23 MAY 1997 UNTIL 30 JUNE 2021

• Castellum share price Castellum share price
• incl reinvested dividend Real Estate Europe
• (EPRA incl dividend)
• Real Estate Sweden (EPRA incl dividend)
• Nasdaq Stockholm (SIX Return incl dividend)
• Turnover over month

Definitions

SHARE-RELATED KEY METRICS

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.

Dividend payout ratio

Dividend per share as a percentage of income from property management per share.

Dividend yield

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

EPRA EPS (Earnings Per Share)

Income from property management adjusted for nominal tax attributable to income from property management, divided 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 NDV – Net Disposal Value

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

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.

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 a given point in time. Average number of shares – the weighted average number of shares outstanding during a given 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.

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.

Income from property management

Net income following add-back of acquisition and restructuring costs, revaluation of results due to stepwise acquisitions, impairment of goodwill and changes in value, as well as tax for both the Group and for joint ventures.

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.

Property type

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

Rental income

Rents debited plus supplements such as reimbursement of heating costs and 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 completely excluded. 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

Interest coverage ratio

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

Loan-to-value ratio

Interest-bearing liabilities after deduction for cash and cash equivalents as a percentage of total assets.

Loan-to-value ratio, Property

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 into possession, and with addition for divested properties still in Castellum's possession.

Net debt to EBITDA

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

Return on EPRA NRV

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

Return on equity

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

Return on total capital

Income before tax with reversed net financial items and changes in 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.

About Castellum

Castellum is one of the Nordic region's largest listed real estate companies with a property value of approximately SEK 97 billion. We are active in 14 Swedish growth regions as well as Copenhagen and Helsinki. 250,000 people go to work every day in our properties. We develop flexible workplaces and logistics solutions with a lettable area of 3.8 million square meters. One of our sustainability goals is to become entirely climate neutral by 2030 at the latest. 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

Interim report January–September 2021 19 October 2021 Year-end report 2021 21 January 2022

www.castellum.se

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

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