Castellum — Interim / Quarterly Report 2021

Apr 21, 2021

High level of activity in the portfolio

Q1INTERIM REPORT JANUARY–MARCH 2021

High level of activity and stable earnings

Important events during the period

The year began with a high level of activity in the property portfolio for the purpose of streamlining and meeting customers' increasing demands, primarily in the warehouse and logistics segment. In the last quarter of 2020, Castellum sold a portfolio to Blackstone, comprising primarily warehouses and logistics properties that were handed over in early February. Subsequently, an additional mature portfolio of 53 properties was sold to Blackstone in the first quarter for net proceeds of SEK 4.8 billion, to be handed over in early May.

After two successful new construction projects in the Brunna logistics hub outside Stockholm, Castellum initiated an additional new production project for approximately MSEK 218 during the quarter. Occupancy is estimated for the second quarter of 2022.

Castellum has also initiated an investment of approximately MSEK 300 in Castellum Säve in Gothenburg for the Swedish Electric Transport Laboratory (SEEL in Swedish). The investment, which pertains to new production of approximately 15,000 square metres that is scheduled to be completed in the spring of 2023, comprises Sweden's largest research facility for electric and goods vehicles. Castellum's vision is to continue to develop the former airport district into one of the Nordic region's largest and most modern logistics hubs with a focus on transportation and mobility.

The Öresund region is one of the areas in which Castellum sees great potential for new warehouse and logistics establishments. In March, building rights in Malmö for a land area of nearly 24,000 square metres were acquired for approximately MSEK 50.

New production in the office segment remains at a high level. In March, plans were presented for the continued development of the district around Torsgatan in Stockholm. The project entails an estimated investment of approximately MSEK 500 in new office buildings with lettable area of approximately 8,000 square metres and attractive inner courtyards. The detailed development plan is being revised and will be presented for consultation later this year. Preliminary completion of the project is planned for 2025.

• Income for the period January–March 2021 totalled MSEK 1,502 (1,476).
• Income from property management amounted to MSEK 779 (794), equivalent to SEK 2.82 (2.91) per share – a change of –3%.
• Change in value on properties amounted to MSEK 1,607 (3) and on derivatives to MSEK 19 (–167).
• Net income for the period amounted to MSEK 3,840 (482), corresponding to SEK 13.90 (1.76) per share.
• Long-term net reinstatement value (EPRA NRV) amounted to SEK 220 per share (193), an increase of 14%.
• Net investments amounted to MSEK –9,014 (643) of which MSEK 177 (75) pertained to acquisitions, MSEK 688 (568) to new construction, extensions and reconstructions, and MSEK –9,879 (0) to sales.
• Net lettings for the period were MSEK 40 (99).

KEY METRICS

2021 Jan–Mar	2020 Jan–Mar	2020 Jan–Dec
1,502	1,476	6,004
1,019	1,038	4,335
779	794	3,380
2.82	2.91	12.35
–3%	+9%	+7%
3,840	482	5,615
–9,014	643	4,267
40	99	239
41%	44%	44%
499%	497%	530%
220	193	214
211	185	205
179	153	168

During the quarter, Castellum announced its plans for investing over a half billion Swedish kronor in the Hornsberg property in the Västra Kungsholmen district of Stockholm to create 15,000 square metres of office. The detailed development plan is expected to be approved in 2022.

Events after the end of the period

In early April, Henrik Saxborn announced that he would be leaving the position of President and CEO in 2021. In consultation with Henrik Saxborn, the Board of Directors has initiated a process to appoint a new President and CEO.

Castellum has signed an agreement with Genesta to sell the Sundby Overdrev property in Copenhagen at a value of MDKK 778, which is on a par with the latest valuation from the fourth quarter of 2020.

In order to promote increased shareholder value, the Board has decided to repurchase own shares by virtue of the authorisation from the 2021 Annual General Meeting.

Front page: Castellum continues to step up its strategic focus on warehouse and logistics buildings in select premium locations. Mekonomen is one of Castellum's tenants who have chosen to establish themselves in the modern, rapidly growing Brunna logistics hub outside Stockholm. Castellum owns just over 180,000 square metres of developed land and land eligible for development, divided among six properties in the area.

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.

Substantial changes – but the same goals

For Castellum, the times have been unusually turbulent lately. A new Board of Directors, a new Chairman of the Board, and I myself have announced that I am stepping down as CEO.

It was gratifying that the shareholders could have their say, and with that we can fully return to normal – meaning a focus on creating shareholder value. I can assure you that I myself will work tirelessly until my last day as CEO to achieve our goals, which will remain unchanged going forward. I also hope to be able to help the new CEO get settled into this fascinating job.

For 2021 in particular, our tough goals entail an extra challenge. As I announced in the Annual Report in February, the major sales will make it difficult to achieve growth in income from property management in the vicinity of the target of 10%. On the other hand, our financial position is stronger than ever. And the turbulence has not made us passive – on the contrary, we have been extremely active.

Our strategy behind the major sales in logistics has been to benefit from the drastically lowered yields, to sell older properties for SEK 10 billion in two transactions and to make major valuation gains (23% in total compared with the valuation in the third quarter 2020). We did this to create the resources, through our own projects with greater profitability, to build new, modern and efficient units adapted to today's requirements in the logistics sector. These transactions have actively contributed to the 14% increase in Castellum's net asset value over the past year to SEK 220 per share and a reduction in the loan-to-value ratio to 41% (44).

What we are currently involved in on the logistics side is the development of Säve, Brunna and Malmö.

Säve will involve numerous possibilities for our logistics operations going forward, with a long-term investment

perspective of around SEK 10 billion, but at this point we are pleased to have strengthened the research element at Säve. For SEEL, the Swedish state's test bed for electromobility, Castellum is now starting construction of 15,000 square metres that will house Sweden's largest research facility for electric and charging vehicles. The investment is estimated at MSEK 300, and the rental value at MSEK 21 per year. This localisation strengthens Säve as a centre for the development of fossil fuel-free mobility.

In Brunna, north of Stockholm, Castellum is investing MSEK 218 in a third large logistics property. The lettable area is 17,000 square metres, and the annual rent is estimated at MSEK 15. Three of our six properties in this area remain to be constructed.

In the Malmö area, Castellum has acquired a number of logistics properties and land at an attractive location adjacent to Malmö's outer ring road for a total of MSEK 250.

Resilient markets

Net lettings for the period were MSEK 40, which indicates significant resilience in our markets. Especially because lettings could still occur without corrections to market rents. In our existing portfolio, rents increased 1%. Owing to the sales, which included more than logistics (e.g., all of the Halmstad portfolio), however, the aggregate income from property management fell 3% during the first quarter.

This is, however, a non-recurring effect in the timing of our strategy of investing in our own major projects that have longer lead times but are considerably more profitable than acquisitions under the current downward pressure on yields. Already from the middle of next year – and on a routine basis going forward – these projects will contribute significant growth.

In 2022, the fully let projects for E.On, the Swedish National Courts Administration (Malmö and Jönköping) and the SwedishMigration Agency will be completed; together, they will add rental income of nearly MSEK 250. A number of public sector properties such as police stations will be added to this.

"Our strategy behind the major sales in logistics has been to benefit from the drastically lowered yields, to sell older properties for SEK 10 billion in two transactions and to make major valuation gains."

Apart from the projects already under way, we show (on page 19) the great potential found in our future development portfolio. The major new projects that are now being planned and where construction can start through 2025 comprise a volume of approximately SEK 20 billion.

Another way of increasing income from property management expressed in SEK per share is using the strong level of financing to repurchase Castellum shares in the market at what we feel is an advantageous price, which entails a healthy discount on current net asset value. In the first quarter, we repurchased approximately 1.9 million shares at an average price of SEK 201. Our total holdings are now just over 2 million shares, corresponding to 0.75% of the total, with an average investment of SEK 198 per share.

Though we did not succeed in the Entra project, we now own just over 10% of the company. Our total investment was MSEK 3,049 compared with the current value of MSEK 3,536 (12 April). I believe this will be an interesting piece of the puzzle in future structural transactions.

After the renovation of the historical property at Torsgatan 22–30 in Stockholm, Castellum is gearing up for the next stage in the renewal of the district. Three office buildings are now being planned, as well as attractive inner courtyards that will draw visitors on evenings and weekends as well.

During the year, we also consolidated Castellum's leading position in the field of ESG and technological development through extensive innovations. Some examples:

• Accessy, a digital lock solution that will entail major possibilities for development going forward, was launched.
• We are already reporting preliminary data in accordance with the EU Taxonomy (page 8).
• We have already constructed 41 rooftop solar cell installations. Castellum's goal is to build a full 100 such installations on our roofs.
• Together with major energy suppliers, Castellum has now initiated a partnership to work out a smart capacity strategy for the future.

As you may have noticed, I have not commented specifically on the effects of the ongoing pandemic. This is because its direct impact on our earnings is extremely marginal, since the rents paid in are still as they were during a normal quarter; customer losses and bankruptcies are almost non-existent.

The dividend in Castellum usually follows income from property management. But in my opinion, our strong financial position makes it possible, if the Board of Directors and Annual General Meeting so wish, not to break with our twenty-three year run of dividend increases regardless of the exact outcome of this individual interim year as regards growth.

Henrik Saxborn CEO

Market comments

Swedish, Danish and Finnish economies

The coronavirus pandemic continued to dominate economic performance both globally and in Sweden in early 2021. Economic performance, however, has accelerated substantially compared with performance during most of 2020, when GDP growth declined drastically and unemployment tended to increase. The majority of financial commentators now feel that the economic recovery that began during the latter part of 2020 will continue in 2021. Nonetheless, unemployment in Sweden is expected to rise slightly to approximately 8.5% in 2021. Sweden's GDP for full-year 2020 fell nearly 3% but is expected to rise 3% in 2021, after which growth is predicted to increase a further 4% in 2022 (Riksbank, February 2021). Low interest rates and very robust monetary policy and fiscal measures have continued to support the financial markets. Swedish housing market prices experienced extremely strong performance over the last twelve-month period. The housing market could be negatively impacted, however, if unemployment rises and economic activity does not perform as favourably as expected, resulting in adverse implications for GDP from slowing private consumption.

The development of the Swedish krona exchange rate has a substantial role in the inflation trend in Sweden, as a weak exchange rate normally contributes to higher inflation. The Swedish krona strengthened in the last half of 2020 and early

MACRO INDICATORS – SWEDEN

Unemployment	8.8%	February 2021
Rate of inflation	1.7%	March 2021 compared to March 2020
GDP growth	–0.2%	Q4 2020 compared with Q3 2020

Source: Statistics Sweden

2021, but once again weakened slightly after the end of the first quarter of 2021. According to the Riksbank (February 2021), inflation – expressed in terms of CPIF – was +0.5% in 2020 and is expected to rise to approximately +1.5% in 2021 and +1.3% in 2022.

Danish and Finnish GDP growth and unemployment respectively were also severely impacted in 2020 as a consequence of the global coronavirus pandemic. In these countries as well, fiscal measures were implemented with some positive effects in addition to the beneficial effects of a highly expansive monetary policy, though some uncertainty remains as to how positive an effect these will yield on performance over time. The primary scenario for Denmark, however, is that GDP will increase 2.8% in 2021 while unemployment willdecrease slightly but remain at a higher level than it was prior to the pandemic. It is believed that the inflation rate in Denmark will end up at +1.2% in 2021 (Danish Ministry of Finance, December 2020). In Finland, it is believed that the recovery of GDP and the inflation rate will be similar: +2.6% (GDP) and +1.3% (inflation rate) in 2021, while unemployment will level out in 2021 and decrease again in 2022 to pre-pandemic levels (Bank of Finland, March 2021).

Rental market

The coronavirus crisis continues to fundamentally change society. Vaccinations are under way around the world, and there were troubling signals of a delayed vaccination plan in Europe during the quarter. Despite the delayed vaccination plans, the expectation of a return to normality can still be glimpsed in the market.

It is still too early to speak about the long-term effects of COVID-19 on rental and vacancy levels, but we can state that Castellum went into the crisis with historically low vacancy levels and record-high rental levels in all markets, at the same time as the company continues to offer office space at the same rental levels as prior to the pandemic. Despite uncertainty going forward, Castellum is still showing premises and conducting business transactions. This is also demonstrated by the fact that net lettings during the first quarter were positive.

Rental levels remained stable in Stockholm and Malmö as a result of continued low vacancy rates in the CBDs and the most attractive sub-markets. Over the short term, the offering of new construction will be limited and primarily let in advance. A downward pressure in the rental market was noted in the Gothenburg CBD. Office rents in regional cities have remained stable in 2021.

The rents for offices in Helsinki's CBD in the first quarter of 2021 remained stable and consolidated on previous record levels. Strong demand has spread from the CBD in Helsinki to the surrounding areas. However, there is a high vacancy rate in secondary areas, as well as in properties of lower quality.

In Copenhagen, rents in the CBD remained stable as well in the first quarter of 2021. A high level of access to land and building rights in and around the city is a limiting factor for rent potential.

The rental market in Sweden for warehouses/logistics spaces was positive during the quarter, with rising rents in prime logistics locations, particularly in semi-central locations with good means of transportation and sorting yards

(last-mile locations). This is driven by strong demand, based mainly on the growth in e-commerce, a growth trend that has strengthened during the coronavirus crisis.

Property market

The volume for transactions over MSEK 40 in the transaction market in Sweden totalled around SEK 44 billion (~41) over 149 transactions (98) in the first quarter of 2021.

Sentiment among investors in the Swedish property market remained strong during the quarter, and there is a great deal of interest in and capital for property investments in the market. In the first quarter of 2021, major portfolio transactions continued to take place in the warehouse/logistics segment at historically low yields. In the office segment as well, several transactions were concluded during the quarter at favourable levels.

The share of foreign investors was approximately 15% (22) in the first quarter of 2021, which is low compared with the last few years. The Nordic property market remains attractive to international investors, but ongoing restrictions resulted in a lower share of foreign investors during the quarter.

In Castellum's markets, the required yield for office properties was stable during the quarter. The number of comparative transactions following the outbreak of the coronavirus crisis remains limited for the office segment, although a greater number of transactions are being concluded at strong levels.

Warehouse and logistics properties continue to attract a growing number of both domestic and international investors, driven largely by the growth of e-commerce, a trend that strengthened during the ongoing coronavirus crisis. Low levels of supply among attractive logistics properties, in combination with high demand among investors, resulted in required yields continuing to fall during the quarter.

In Denmark, the transaction volumes in the property market totalled approximately DKK 19 billion (~11) in the first quarter

of 2021. The mood among investors remains strong and a shift in investor interest from the housing segment to the office segment has been noted. The required yield for offices in the CBD in

Copenhagen is assessed as remaining stable at 3.5%.

In Finland, the transaction volumes in the property market totalled approximately EUR 0.9 billion (~1.7) in the first quarter of 2021. There is a considerable demand among investors 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. Increased investor interest has been noted for secondary and development properties as well.

Altogether, this indicates a strong property market, despite the fact that the macroeconomic effects of the pandemic are as yet not fully transparent.

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 (February 2021) still indicates that the repo rate will remain at zero at least through 2023.

Swedish long-term interest rates rose in early 2020 but trended downward again with the outbreak of the pandemic. The downturn reversed at the end of 2020, however, and long-term interest rates have gradually risen since then to return to the levels they stood at in early 2020. At the end of the first quarter of 2021, the five-year swap rate was approximately 30 basis points (0.3%), which was approximately 20 basis points higher than at the end of the preceding year. Current levels remain historically very low, however.

Access to financing in the Swedish and international capital markets deteriorated radically at the end of the first quarter of 2020 and credit spreads then widened drastically. During the latter part of 2020, the situation improved markedly and

the spreads fell back to pre-pandemic levels. The credit spread for investment-grade borrowers in early 2021 remained favourable for borrowers, even though lending conditions in the property sector have not improved to the exact same extent as for most other sectors.

In Denmark, the CIBOR 3m rate remained stable in the range of –0.2% to –0.25% during the first quarter of the year. At the end of the first quarter of 2021, CIBOR 3m was around –0.2%. EURIBOR 3m was also stable during the first quarter of the year, at around –0.55%.

Castellum's agenda for the sustainable city

KEY METRICS – SUSTAINABILITY	2021 Q1	2020	2019	2018	2017	Targets
Resource efficiency
Total energy use, kWh per sq. m., year	80	75	88	97	94
Total energy use, degree-day corrected, kWh per sq. m., year	83	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	55	50	60	64	64
2. of which normalised heating	58	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, %	–6%	–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	743	—	—	—	—	New measurement point, 2021
No. of large solar cell facilities installed	41	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)	1.0	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	0.9	0.9	1.4	1.0	1.4
of which scope 2 – location based	4.2	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.	43%	39%	36%	33%	29%	50% certified area by 2025
Environmental certification, no. of properties	166	202	164	141	129
Environmental certification, % of rental income	53%	52%	47%	43%	39%
Environmental certification, % of property value	56%	55%	51%	48%	43%
ESG benchmarks
GRESB points (0–100)	TBD	91	92	92	95	Marks for 2021 will be received during Q3–Q4 2021
DJSI points (0–100)	TBD	81	79	73		72 Marks for 2021 will be received during Q3–Q4 2021
CDP mark (A to D-)	TBD	A	A–	B	A–	Marks for 2021 will be received during Q3–Q4 2021
Social key metrics
Sick leave, % (long-term and short-term)	1.9%	2.2%	2.9%	3.8%	2.0%	Max 2% short-term and 3% long-term sick leave
Equality, % women and men		43%/57% 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	407	188	69	7	48	719	53%
Direct property costs	–93	–33	–15	–2	–5	–148	45%
of which
1. Operating costs	–52	–18	–11	–2	–1	–84	40%
2. Maintenance	–7	–3	–2	–0	–1	–13	43%
3. Property tax	–34	–12	–2	–0	–3	–51	57%
Net operating income	314	155	54	5	43	571	55%
Property value	29,395	13,920	4,753	478	2,924	51,470	56%
New construction, extensions and reconstructions	102	21	15	0	17	155	46%
1,000 sq. m.	783	349	275	25	108	1,540	43%
No. of properties	83	28	31	6	18	166	33%

EU TAXONOMY – PRELIMINARY GUIDANCE, FIRST QUARTER 2021

MSEK	EPC A	EPC B	EPC C	Total	Share of property management portfolio
Rental income	52	149	341	542	40%
Direct property costs	–10	–31	–75	–116	36%
of which
1. Operating costs	–5	–19	–46	–70	34%
2. Maintenance	–1	–2	–7	–10	33%
3. Property tax	–4	–10	–22	–36	41%
Net operating income	42	118	266	426	41%
Property value	3,184	9,853	21,943	34,980	38%
New construction, extensions and reconstructions	9	12	61	82	24%
Lettable area, 1,000 sq. m.	128	413	930	1,471	41%
No. of properties	13	55	118	186	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 guide the market based on Castellum's current knowledge of which key metrics will govern investment properties. For buildings constructed prior to 31 December 2020 we have been informed that the governing criteria are supposed to be Energy Performance Certificate (EPC) ratings A or that the building has a primary energy demand 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 guiding information. For buildings with an EPC rating C we have approximated a limit if they are to be counted among the top 15% most energy efficient and they are only accounted for if they have a calculated primary energy consumption lower than 100 kWh per sqm, and year.

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 Jan–Mar	2020 Jan–Mar	Rolling 4 quarters April 2020–March 2021	2020 Jan–Dec
Rental income		1,373	1,345	5,466	5,438
Service income		100	100	454	454
Co-working income		29	31	110	112
Income	Note 2	1,502	1,476	6,030	6,004
Operating costs	Note 3	–229	–184	–699	–654
Maintenance expenses	Note 3	–31	–34	–142	–145
Property tax	Note 3	–94	–91	–374	–371
Co-working expenses	Note 3	–35	–36	–119	–120
Lettings and property administration expenses	Note 3	–94	–93	–380	–379
Net operating income		1,019	1,038	4,316	4,335
Central administrative expenses	Note 3	–38	–37	–150	–149
Acquisition costs	Note 4	—	—	–25	–25
Net financial items	Note 5
Net interest costs		–195	–200	–781	–786
Financing fees, etc. for acquisitions		—	—	–70	–70
Letting cost/Site leasehold fee		–7	–7	–20	–20
Income from property management incl. acquisition costs/financing costs1)	Note 1	779	794	3,270	3,285
Income from property management		779	794	3,365	3,380
Changes in value	Note 6
Properties		1,607	3	5,467	3,863
Financial holdings		491	—	491	—
Derivatives		19	–167	66	–120
Income before tax		2,896	630	9,294	7,028
Current tax	Note 7	–23	–42	–228	–247
Deferred tax	Note 7	967	–106	–93	–1,166
Net income for the period/year		3,840	482	8,973	5,615
Other comprehensive income
Items that will be reclassified to net income for the period
Translation difference of currencies, etc.		155	415	–476	–216
Change in values on derivatives, currency hedge		–36	–275	283	44
Comprehensive income for the period/year2)		3,959	622	8,780	5,443
Average number of shares, thousand		276,172	273,201	274,366	273,628
Earnings, SEK/share		13.90	1.76	32.70	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 25.

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 28.

Performance analysis, January–March 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–March 2021 amounted to MSEK 779 (794), corresponding to SEK 2.82 per share (2.91) – a change of –3%. Income from property management, rolling four quarters, amounted to MSEK 3,365 (3,214), equivalent to SEK 12.26 per share (11.76) – a change of +4%.

SEGMENT INFORMATION

		Income	Income from property management
MSEK	2021 Jan–Mar	2020 Jan–Mar	2021 Jan–Mar	2020 Jan–Mar
Central	407	396	221	220
West	328	343	186	202
Öresund	301	296	165	164
Stockholm–North	398	395	256	247
Finland	39	15	7	7
Co-working	29	31	–7	–4
Total	1,502	1,476	828	836

The difference between the income from property management of MSEK 828 (836) above and the Group's reported income before tax of MSEK 2,896 (630) consists of unallocated income from property management of MSEK –49 (–42), change in value on financial holdings of MSEK 491 (0), change in values on properties of MSEK 1,607 (3) and change in values on derivatives of MSEK 19 (–167).

Note 2 Income

The Group's income totalled MSEK 1,502 (1,476). Rental income includes discounts of MSEK 28 (28) as well a lump sum of MSEK 14 (3) as a result of early termination of leases.

The average economic occupancy rate was 92.9% (93.8). Moreover, the co-working company United Spaces generated income of MSEK 29 (31) in the period.

DEVELOPMENT OF INCOME

Co-working Income	29 1,502	31 1,476	+1.8%
Transactions	146	154
Development properties	72	48
Like-for-like portfolio	1,255	1,243	+1.0%
MSEK	2021 Jan–Mar	2020 Jan–Mar	Change, %

Rental income in the like-for-like portfolio increased 1.0%, which was due to higher rents but also to lower discounts. Gross lettings (i.e. the annual value of total lettings) during the period was MSEK 139 (185), of which MSEK 51 (109) pertained to lettings in conjunction with new construction, extensions and reconstructions. Notices of termination amounted to MSEK 99 (86), of which bankruptcies were MSEK 1 (1) and MSEK 30 (7) were notices of termination with more than 18 months left of contract. Accordingly, net lettings for the period totalled MSEK 40 (99). 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.

NET LETTINGS JAN–MAR 2021

			Region
MSEK	Central	West	Öresund Sthlm North			Finland Total		–120 –180
New lettings									11	12	13	14	15	16	17	18	19	20 21
Existing prop.	22	19	19	21	—	7	88					New Leases, investments				Bankruptcies
Investments	1	43	7	—	—	—	51					New leases, existing properties						Notices of termination <18 months
Total	23	62	26	21	—	7	139					Net leasing, rolling 4 quarters						Notices of termination >18 months
Notices of termination
Existing prop.	–16	–37	–17	–25	–3	—	–98
Bankruptcies	–1	—	—	—	—	—	–1
Total	–17	–37	–17	–25	–3	—	–99
Net lettings	6	25	9	–4	–3	7	40
NOI Q1 2020	19	10	72	–3	1	—	99											CONT. NEXT PAGE

INCOME FROM PROPERTY MANAGEMENT PER SHARE

NET LETTINGS

Note 3 Costs

Direct property costs totalled MSEK 354 (309), corresponding to SEK 364/sq. m. (293). For the like-for-like portfolio, property costs increased 9%, which is primarily attributable to higher costs for heating, electricity and snow removal as a consequence of a colder quarter compared with the previous year. In addition, costs for co-working totalled MSEK 35 (36).

Property administration totalled MSEK 94 (93), corresponding to SEK 105 per square metre (90).

Central administrative expenses were MSEK 38 (37). Central administrative expenses also included costs related to the earnings and share price-related incentive plans for members of Executive Management of MSEK 2 (3).

COST TRENDS

MSEK	2021 Jan–Mar	2020 Jan–Mar	Change, %
Like-for-like portfolio	294	269	+9.3%
Development properties	19	12
Transactions	41	28
Direct property costs	354	309	+14.6%
Co-working	35	36
Property administration	94	93
Central administration	38	37
Total costs	521	475	+9.7%

Consumption for heating during the period has been calculated at 97.3% (76.6) 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	289	237	161	186	133	232
Maintenance expenses	41	35	16	22	27	33
Property tax	139	112	27	31	76	99
Property costs	469	384	204	239	236	364
Lettings & prop. admin.						105
Total	469	384	204	239	236	469
NOI Q1 2020	399	342	160	174	252	383

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 195 (–200). The average interest rate over the period was 1.9% (2.0). Net interest was positively affected by approximately MSEK 15 due to the 0.1 percentage point decrease in the average interest rate. Furthermore, costs for site leasehold fees amounted to MSEK 6 (5) and for lease agreements to MSEK 1 (2).

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 despite it still being impossible to fully overview the effects of the pandemic.

Castellum recognised an unrealised change in value of MSEK 1,048 (3), 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 559 (0) was recognised, primarily comprising the sale of 92 properties to Blackstone.

Castellum owns approximately 10% of the listed Norwegian property company Entra. The holding is measured at fair value, which resulted in an unrealised change in value of MSEK 491 (0) during the period.

The value of the derivatives changed by MSEK 19 (–167), mainly due to changes in long-term market interest rates.

CHANGE IN VALUES ON PROPERTIES

MSEK	2021 Jan–Mar	2020 Jan–Mar
Cash flow	–93	–6
Project gains/building rights	405	4
Required yield	736	—
Acquisitions	0	5
Unrealised changes in value	1,048	3
NOI %	1.1%	0.0%
Sales	559	—
Total	1,607	3
NOI %	1.7%	0.0%

Note 7 Tax

Recognised tax totalled MSEK 944 (–148), of which MSEK –23 (–42) is current tax, and was calculated based on a 20.6% tax rate. 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 316 (724). Furthermore, there are untaxed reserves of MSEK 733 (425). Fair values for the properties exceed their fiscal value by MSEK 57,554 (56,780) of which MSEK 7,410 (6,575) relates to the acquisition of properties accounted for on the acquisition date as asset acquisitions. A full nominal tax of 20.6% of the net from these items less the deferred tax attributable to the asset acquisitions – that is, MSEK 10,416 (10,279) – is recognised as a deferred tax liability. Castellum has no ongoing tax disputes.

TAX CALCULATION 31 MAR 2021

MSEK	Basis current tax	Basis deferred tax
Income from property management	779
Non-deductible interest	77
Deductions for tax purposes
depreciation	–254	254
reconstructions	–66	66
Transfers to tax allocation reserve	–115	115
Other tax adjustments	–20	157
Taxable income from property management	401	592
current tax if tax loss carry forwards not utilised	11%
Sales of properties	—	–6,622
Change in values on properties	—	1,048
Taxable income before tax loss carry forwards	401	–4,982
Tax loss carry forwards, opening balance	–603	602
Tax loss carry forwards, closing balance	316	–316
Taxable income	114	–4,695
Tax according to the income statement for the period	–23	967

NET DEFERRED TAX LIABILITY 31 MAR 2021

MSEK	Basis	Nominal tax liability	Real tax liability
Tax loss carry forwards	316	65	65
Untaxed reserves	–733	–151	–151
Properties	–57,554	–11,856	–2,073
Total	–57,971	–11,942	–2,159
Properties, asset acquisitions	7,410	1,526
In the balance sheet	–50,561	–10,416

Deferred tax is in principle both interest-free and amortisationfree, 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		31 Mar 2021	31 Mar 2020	31 Dec 2020
ASSETS
Investment properties	Note 8	95,816	96,262	103,042
Goodwill	Note 9	1,673	1,691	1,673
Leases, right-of-use	Note 10	1,056	849	888
Financial assets	Note 11	3,540	—	2,729
Other fixed assets		227	182	200
Current receivables		6,089	1,226	1,223
Cash and cash equivalents		1,203	1,174	161
Total assets		109,604	101,384	109,916
Equity and liabilities
Equity		49,921	42,623	48,243
Deferred tax liability	Note 7	10,416	10,279	11,376
Other provisions		10	6	3
Interest-bearing liabilities	Note 12	42,824	43,544	45,720
Derivatives	Note 13	720	506	1,132
Lease liability	Note 10	1,056	849	888
Non-interest bearing liabilities		4,657	3,577	2,554
Total equity and liabilities		109,604	101,384	109,916
Pledged assets (pledged mortgages)		20,714	19,698	21,231
Pledged assets (chattel mortgages)		—	—	—
Contingent liabilities		—	—	—

Condensed Changes in Equity

Number of shares outstanding,	Share	Other capital	Currency translation	Currency hedge	Non-controlling	Retained	earnings Total equity
273,201	137	12,434	366	–316	–2	31,158	43,777
—	—	—	—	—	—	–1,776	–1,776
—	—	—	—	—	—	482	482
—	—	—	415	–275	—	—	140
273,201	137	12,434	781	–591	–2	29,864	42,623
—	—	—	—	—	—	5,133	5,133
–170	—	—	—	—	—	–28	–28
4,062	2	825	—	—	—	—	827
—	—	—	–631	319	—	—	–312
277,093	139	13,259	150	–272	–2	34,969	48,243
—	—	—	—	—	—	–1,898	–1,898
–1,905	—	—	—	—	—	–383	–383
—	—	—	—	—	—	3,840	3,840
—	—	—	155	–36	—	—	119
275,187	139	13,259	305	–308	–2	36,528	49,921
	thousand	capital	contribution	reserve	reserve	interest

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 commercial portfolio consists of 52% office, 23% public sector properties, 12% warehouse/logistics, 8% retail and 1% light industry. The properties' locations vary from city centre locations to well-situated business districts with good means of communication and services. The remaining 4% consists of projects and undeveloped land.

Castellum has a potential project volume that can be started over the next four years, as shown on page 19, and major ongoing projects where the remaining investment volume totals approximately SEK 3.4 billion.

Investments

During the period, investments totalling MSEK 865 (643) were carried out, of which MSEK 177 (75) were acquisitions and MSEK 688 (568) new construction, extensions and reconstructions. After sales and cash settlements of MSEK 9,879 (0), net investments amounted to MSEK –9,014 (643).

CHANGES IN THE PROPERTY PORTFOLIO

	Fair value, MSEK	Number
Property portfolio on 1 January 2021	103,042	642
+ Acquisitions	177	4
+ New construction, extensions and reconstructions	688	—
– Sales	–9,320	–94
+/– Unrealised changes in value	1,048	—
+/– Currency translation	181	—
Property portfolio on 31 March 2021	95,816	552

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 2,200 (1,500) per square metre. In order to ensure and validate the quality of the internal valuations, an external valuation – representing over 50% of the portfolio – is made every year end. The difference between the internal and external valuations is, and historically has been, small.

Based on these internal valuations, property value at the end of the period was assessed at MSEK 95,816 (103,042), corresponding to SEK 25,638 (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 4.9% (5.0).

AVERAGE VALUATION YIELD

(excl. projects/land and building rights)	MSEK
Net operating income, properties	1,040
+ Real occupancy rate, 94% at the lowest	55
+/– Property costs at annual rate	39
– Property admin, SEK 30/sq. m.	–29
Normalised net operating income (3 months)	1,105
Valuation (excl. building rights of MSEK 913)	91,061
Average valuation yield	4.9%

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

PROPERTY-RELATED KEY METRICS

	2021 Jan–Mar	2020 Jan–Mar	2020 Jan–Dec
Rental value, SEK/sq. m.	1,649	1,516	1,538
Economic occupancy rate	92.9%	93.8%	93.1%
Property costs, SEK/sq. m.	469	383	369
Net operating income, SEK/sq. m.	1,055	1,014	1,039
Property value, SEK/sq. m.	25,638	22,451	23,549
No. of properties	552	635	642
Lettable area, thousand sq. m.	3,798	4,253	4,447
Average valuation yield	4.9%	5.1%	5.0%

Property value NET INVESTMENTS PER REGION

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 91,025–100,607, equivalent to +/– MSEK 4,791.

Castellum's property portfolio

		31 Dec 2021			January–March 2021
Category	No. of properties	Area, thousand sq. m.	Property value, MSEK	NOI SEK/sq. m.	Rental value, MSEK	NOI SEK/sq. m.	Occupancy rate	Income, MSEK	Property costs, MSEK	NOI SEK/sq. m.	Net operating income, MSEK
OFFICES
Stockholm	31	289	13,052	45,095	171	2,369	92.9%	158	33	456	125
West	63	360	10,859	30,179	166	1,846	89.4%	156	36	400	120
Central	77	536	11,250	20,991	216	1,614	91.9%	197	57	425	140
Öresund	42	396	11,540	29,141	206	2,077	92.2%	185	47	478	138
North	2	5	102	20,294	2	1,630	97.2%	2	1	516	1
Finland	7	58	2,765	47,543	44	2,986	90.9%	38	19	1,315	19
Total Office	222	1,644	49,568	30,144	805	1,958	91.6%	736	193	469	543
PUBLIC SECTOR PROPERTIES
Stockholm	12	89	5,844	65,407	72	3,220	90.8%	64	12	525	52
West	11	77	1,552	20,233	26	1,344	91.6%	23	5	274	18
Central	32	315	8,613	27,356	139	1,765	96.6%	134	32	404	102
Öresund	9	98	3,675	37,527	52	2,143	98.6%	52	8	344	44
North	10	100	2,093	20,900	38	1,501	97.2%	39	8	320	31
Total Public sector properties	74	679	21,777	32,073	327	1,924	95.3%	312	65	384	247
WAREHOUSE/LOGISTICS
Stockholm	19	117	2,828	24,192	38	1,315	93.3%	35	7	229	28
West	51	443	6,097	13,768	97	880	92.7%	88	22	200	66
Central	18	101	1,079	10,717	20	808	86.0%	17	4	195	13
Öresund	22	136	1,684	12,367	31	902	90.5%	27	7	202	20
Total Warehouse/Logistics	110	797	11,688	14,672	186	939	91.7%	167	40	204	127
RETAIL
Stockholm	25	142	3,476	24,506	58	1,627	98.0%	55	8	237	47
West	11	50	1,084	21,497	19	1,526	97.4%	19	1	49	18
Central	22	117	1,915	16,299	38	1,280	97.6%	37	9	278	28
Öresund	12	51	925	18,255	19	1,516	88.2%	16	4	320	12
Total Retail	70	360	7,400	20,531	134	1,484	96.4%	127	22	236	105
LIGHT INDUSTRY
Stockholm	7	31	610	19,650	10	1,268	96.8%	9	2	302	7
West	11	39	491	12,494	8	863	92.9%	8	2	188	6
Central	8	24	317	13,560	6	1,002	97.2%	6	2	262	4
Öresund	1	13	123	9,279	3	847	83.5%	2	1	206	1
Total Light Industry	27	107	1,541	14,404	27	1,009	94.3%	25	7	239	18
Total investment properties	503	3,587	91,974	25,638	1,479	1,649	92.9%	1,367	327	364	1,040
Lettings and property administration expenses									94	105	–94
Total after lettings and property administration									421	469	946
Projects	31	211	3,334	—	18	—	—	10	6	—	4
Undeveloped land	18	—	508	—	—	—	—	—	—	—	—
Total	552	3,798	95,816	—	1,497	—	—	1,377	427	—	950

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 950 reported above and the net operating income of MSEK 1,019 in the income statement is explained both by the deduction of the net operating income of MSEK 76 in properties sold during the period, by the MSEK 1 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 –6 from the co-working company in the table above.

A more detailed description of property categories is available on page 32, Definitions.

Customers

Castellum's property portfolio and customer segments

Castellum's portfolio is well distributed over various segments, whereby almost half consist of office buildings and a quarter comprise public sector properties. The latter provide a stable and secure income base, in the form of customers as well as longer contract durations. Castellum's exposure to the retail segment currently represents 8% of income value, but this segment includes grocery stores and car dealerships. Another type of retail exposure also occurs in the warehouse/ logistics segment, in the form of storage and distribution from the fast-growing e-commerce segment, which favours rental growth and contributes to the transformation of well-situated properties in the form of the last mile.

Lease maturity structure

Contract maturities for Castellum's portfolio appear in the table below. The relatively low proportion of contracts maturing in 2021 is primarily due to the fact that most contracts have already been renegotiated.

Risk exposure, credit risk

Castellum's lease portfolio features a good risk exposure. The Group has approximately 5,400 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 single customer is very low.

The remaining average length of contract was 3.9 years (3.9).

COMMERCIAL LEASES DISTRIBUTED BY SECTOR

Public sector 25%

• Commercial services, consultants 20%
• Industrial durables- & 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%
• Transport 2%
• Forestry 2%
• Energy 2%
• Food: grocery stores and producers 1%
• Real estate 1%
• FMCG 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.

LEASE MATURITY STRUCTURE, 31 MAR 2021

MSEK	No. of leases	Lease value, MSEK	Percentage of value
Commercial, term
2021	1,097	137	3%
2022	1,591	1,067	20%
2023	1,156	1,039	20%
2024	948	889	17%
2025	217	459	9%
2026+	350	1,500	28%
Total commercial	5,359	5,091	97%
Residential	439	42	1%
Parking spaces and other	5,808	103	2%
Total	11,606	5,236	100%

LEASE SIZE 31 MAR 2021

Lease size, MSEK	No. of leases	Share	Lease value, MSEK	Share
Commercial
<0.25	2,617	23%	189	4%
0.25–0.5	859	7%	317	6%
0.5–1.0	784	7%	556	11%
1.0–3.0	748	6%	1,281	24%
>3.0	351	3%	2,748	52%
Total	5,359	46%	5,091	97%
Residential	439	4%	42	1%
Parking spaces and other	5,808	50%	103	2%
Total	11,606	100%	5,236	100%

Castellum's project portfolio

1. Åseby 1:5

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

1. Sörred 7:23 GOTHENBURG

• ONGOING New construction, warehouse Investment: MSEK 78

3. Backa 20:5 GOTHENBURG

• COMPLETED New construction, warehouse

Investment: MSEK 82 4. Gamlestaden 22:14 GOTHENBURG

• ONGOING Reconstruction, office Investment: MSEK 67

5. Heliumgasen 11 GOTHENBURG • ONGOING

New construction, warehouse Investment: MSEK 69

6. Sesamfröet 2 MÖLNDAL • ONGOING

Reconstruction, public sector prop. Investment: MSEK 280

• ONGOING New construction, office Investment: MSEK 320

1. Sellerin 3

2. Bollbro 15 HELSINGBORG • ONGOING

3. Götaland 5 JÖNKÖPING • ONGOING

Investment: MSEK 125

Investment: MSEK 325

1. GreenHaus HELSINGBORG

Reconstruction, public sector prop.

LUND • COMPLETED New construction, warehouse

New construction, office

13. Dragarbrunn 21:1

UPPSALA • ONGOING

New/reconstruction, office Investment: MSEK 493

1. Örnäs 1:17

STOCKHOLM

• ONGOING New construction, logistics

1. Verkstaden 14 Investment: MSEK 218

VÄSTERÅS

• ONGOING New construction, public sector prop. Investment: MSEK 198

16

17

1. Hissmontören 4 ÖREBRO • ONGOING New construction, office

Investment: MSEK 118

1. Korsningen 1 ÖREBRO • ONGOING

New construction, public sector prop. Investment: MSEK 227

ONGOING COMPLETED

Investment: MSEK 88

Investment: SEK 1.3 billion

Larger investments and projects

LARGER ONGOING INVESTMENTS

Sjustjärnan 1/E.ON Offices New construction Malmö Q1 2023 31,460 78 91% 1,296 429 Public sector Godsfinkan 1 property New construction Malmö Q1 2023 26,500 81 91% 1,270 570 Dragarbrunn 21:1 Offices New/reconstruction Uppsala Q4 2021 14,130 45 72% 493 308 Public sector Götaland 5 property New construction Jönköping Q3 2022 9,200 23 100% 325 61 Jeppe 1/GreenHaus Offices New construction Helsingborg Q2 2022 7,000 19 55% 320 239 Public sector Åseby 1:5 property New construction Gothenburg Q3 2023 14,780 21 100% 301 12 Public sector Sesamfröet 2 property Reconstruction Mölndal Q3 2022 5,600 24 100% 280 26 Public sector Korsningen 1 property New construction Örebro Q2 2022 5,650 15 100% 227 66 Public sector Verkstaden 14 property New construction Västerås Q1 2022 5,800 14 88% 198 107 Örnäs 1:17 Logistics New construction Stockholm Q2 2022 16,870 15 0% 218 64 Public sector Bollbro 15 property Reconstruction Helsingborg Q1 2023 3,810 7 92% 125 17 Hissmontören 4, Örebro Offices New construction Örebro Q1 2022 3,400 9 53% 118 21 Gamlestaden 22:14 Offices Reconstruction Gothenburg Q2 2022 4,610 5 100% 67 5 Sörred 7:23 Warehouse New construction Gothenburg Q1 2022 6,220 7 100% 78 17 Heliumgasen 11 Warehouse New construction Gothenburg Q1 2022 4,440 6 100% 69 19 Developments completed or fully/partly occupied Sellerin 3 Warehouse New construction Lund Q1 2021 5,190 7 40% 88 82 Backa 20:5 Warehouse New construction Gothenburg Q1 2021 4,600 7 100% 82 69 Total developments, >MSEK 50 169,260 383 84% 5,555 2,112	Property	Category	Investment type	Location	Completed	Area, sq. m.	Rental value, MSEK	Econ. occup. April 2021	Total inv. incl. land, MSEK	Of which developed, MSEK	Remaining inv., MSEK
											867
											700
											185
											264
											81
											289
											254
											161
											91
											154
											108
											97
											62
											61
											50
											6
											13
											3,443

Castellum has an ongoing development portfolio of approximately SEK 5.6 billion, of which SEK 2.1 is developed. The average economic occupancy rate in April 2021 is 84%.

These projects make possible project gains, based on current market yields, of SEK 1.9 billion, of which SEK 600 million has already been recognized. There is thus the possibility for future project gains of a further SEK 1.3 billion, given current pricing of various property types.

Two projects were partially completed during the period, with occupation, at the same time as six new projects were started; the latter correspond to a total investment volume of approximately MSEK 850. This includes the start of SEEL's establishment at Säve, a new production of 14,778 square metres at an investment of approximately SEK 300 million. This is an investment that fits in well with 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		11,500	5,800
Helsingborg Logistics		20,000	—
Jönköping	Offices	25,200	—
Jönköping	Other	8,000	—
Linköping	Offices	4,000	8,400
Linköping	Other	—	10,000
Lund	Offices	20,000	—
Malmö	Offices	6,200	30,000
Malmö	Logistics	29,000	—
Norrköping Offices		14,600	—
Stockholm	Offices	28,500	120,000
Stockholm	Logistics	43,100	—
Stockholm	Other	—	7,600
Uppsala	Offices	—	10,900
Uppsala	Logistics	4,000	—
Västerås	Offices	—	13,900
Örebro	Offices	7,000	1,700
Total		221,100	677,300

POTENTIAL CONSTRUCTION START 2021–2025, LARGEST

Project	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 Nordstan1)	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
Werket	Jönköping	Reconstruction	Offices	In effect	20,700
Lindetorp	Stockholm	New construction	Offices	Ongoing	20,000
Forskaren	Lund	New construction	Offices	In effect	20,000
Infinity	Stockholm	New construction	Offices	In effect	19,800
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	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
Långberga Stage 1	Helsingborg	New construction	Logistics	In effect	10,000
Total					718,765

1. Land allocation agreement

Note 9 Goodwill

In 2016, the CORHEI and Norrporten companies were acquired. Goodwill arose in connection with these acquisitions, primarily related to the difference between nominal tax and the calculated supplementary tax which was applied at time of acquisition. A write-off for goodwill is primarily justified for a major downturn in the property market or a situation wherein properties included in the transaction above are divested. At the end of the period, goodwill attributable to deferred tax was MSEK 1,480 (1,480). In addition, the co-working company United Spaces was acquired in early 2019, which is why goodwill amounting to MSEK 193 (193) arose at the end of the period.

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 1,056 (888), divided into site leasehold agreements of MSEK 492 (483) and rental agreements in United Spaces, the co-working company, of MSEK 564 (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

In the first quarter, Castellum acquired additional shares in Entra, bringing the total holdings to 18,225,000 shares, corresponding to 10%. The fair value of the holdings at the end of the accounting period totalled MSEK 3,540, involving an unrealised change in value of MSEK 491 in the first quarter.

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 60,224 (63,500), of which MSEK 46,048 (46,894) was long-term and MSEK 14,176 (16,606) was short-term. Of the utilised borrowing facilities at the end of the period, MSEK 29,448 (29,693) was long-term and MSEK 12,173 (15,866) short-term.

After deduction of cash of MSEK 1,203 (161), net interestbearing liabilities were MSEK 41,621 (45,559), of which MSEK 28,346 (29,127) were bonds outstanding and MSEK 8,346 (8,844) commercial paper outstanding (nominal MSEK 28,383 and MSEK 8,352 respectively).

During the first quarter, bank credit facilities of approximately MSEK 840 were extended and approximately MSEK 2,000 were terminated. In the domestic bond market, Castellum also issued new bonds with a nominal amount of MSEK 350 during the first quarter as part of its Swedish MTN programme, while bonds with a nominal value of MSEK 1,350 matured.

Most of Castellum's borrowings are revolving facilities, which means great flexibility. Issued bonds and commercial paper expand the financing base, and account for the majority of the utilised borrowing facilities. At the end of the period, the fair value of liabilities essentially corresponded with the carrying amounts. Long-term bank loan commitments are normally secured by pledged property deeds. Issued commercial paper and bonds are unsecured. Undertakings to meet specific financial ratios are included as covenants under financing agreements including the EMTN program.

Of net interest-bearing liabilities totalling MSEK 41,621 (45,559), MSEK 4,929 (7,588) was pledged against property deeds and MSEK 36,692 (37,971) was unsecured, which means that approximately 12% (17) of loans outstanding were secured. The proportion of secured financing used, with the addition of commercial paper outstanding backed by secured bank credit commitments, was thus 14% (16) of the properties' value. Castellum's share of unsecured assets at the end of the period was 63% (61). Secured borrowing in relation to total assets was 4% (7).

The financial covenants stipulate an LTV ratio not exceeding 65%, an interest coverage ratio of at least 150% and for EMTN also that the share of secured borrowing may not exceed 45% of the Group's total assets, which Castellum fulfils with comfortable margins showing current levels for those ratios at: 41%, 499% and 4% respectively. The average debt maturity structure for utilised borrowing facilities including extension options at year end was 4.0 years (3.8), whereas the average credit price tenor at the same point in time was 3.1 years (3.0). At the end of the period, the net debt to EBITDA ratio was 11 (11).

CREDIT MATURITY STRUCTURE, 31 MARCH 2021

		Utilised in
Credit agreements	MSEK	Bank	MTN/Comm. paper	Total	Share, %
0–1 year	14,176	–373	12,546	12,173	29%
1–2 years	11,159	611	4,148	4,759	11%
2–3 years	14,447	879	7,768	8,647	21%
3–4 years	2,907	11	2,896	2,907	7%
4–5 years	7,305	11	2,894	2,905	7%
>5 years	10,230	3,790	6,440	10,230	25%
Total	60,224	4,929	36,692	41,621	100%

DISTRIBUTION OF INTEREST-BEARING FINANCING, 31 MAR 2021

INTEREST RATE MATURITY STRUCTURE, 31 MARCH 2021

Maturity date	MSEK2)	Share, %	Average interest rate, %1)	Average fixed interest rate term
0–1 year	19,530	47%	1.71%	0.2
1–2 years	2,550	6%	0.64%	1.4
2–3 years	5,702	14%	2.28%	2.6
3–4 years	1,798	4%	1.12%	3.7
4–5 years	1,399	3%	1.86%	4.4
5–10 years	10,642	26%	1.55%	8.7
Total	41,621	100%	1.66%	3.1

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.

SECURED CREDIT FACILITIES, 31 MAR 2021

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

Interest rate maturity structure

In order to secure a stable and low net interest cash flow, the interest rate maturity structure is distributed over time. The average fixed interest term was 3.1 years (2.6). The average effective rate at 31 March 2021 was 1.66% (1.69) excluding unutilised credit agreements, and 1.80% (1.82) including unutilised credit agreements. Castellum utilises interest rate swaps to achieve the desired interest rate maturity structure. Interest rate swaps are a cost-efficient and flexible way to achieve the desired fixed interest term.

In the interest rate maturity structure, interest rate swaps are accounted for in the earliest time segment in which they can mature. Credit margins and fees are distributed in the table by reported underlying loans, while credit fees are reported in the segment for 0–1 year.

Currency exposure

Castellum owns properties in Denmark and Finland with a value of MSEK 9,313 (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.

Note 13 Interest rate and currency derivatives

Castellum utilises interest rate swaps to achieve the desired interest rate maturity structure. In accordance with the IFRS 9 accounting standard, derivatives are subject to market valuation. If the agreed interest rate deviates from the market interest rate, notwithstanding credit margins, a theoretical surplus or deficit value arises in the interest rate swaps, where changes in value not affecting the cash flow are recognised in profit or loss. At maturity, a derivative's market value is dissolved in its entirety and the change in value over time has thus not affected equity. Castellum also holds derivatives in order to hedge currency fluctuation in its investments in Denmark and Finland as well as to manage currency risk and adjust its interest rate structure in connection with borrowing in the international capital market.

As for currency derivatives, a theoretical surplus/deficit value occurs if the agreed exchange rate deviates from the current exchange rate, where the effective portion of changes in value is accounted for in other comprehensive income.

To calculate the market value of derivatives, market rates for each term and, where appropriate, exchange rates as quoted in the market at the closing date are used. Interest rate swaps are valued by discounting future cash flows to present value while instruments containing options are valued at current repurchase price.

As of 31 March 2021, the market value of the interest rate swap portfolio amounted to MSEK –365 (–740) and the currency derivative portfolio to MSEK –355 (–392). All derivatives are, as for the previous year, classified at level 2 according to IFRS 13.

CASTELLUM'S FINANCIAL POLICY AND COMMITMENTS IN CREDIT AGREEMENTS

	Policy	Commitment	Outcome
Loan-to-value ratio	Not exceeding 50%	Not exceeding 65%	41%
Interest coverage ratio	At least 200%	At least 150%	499%
The share of secured borrowing/total assets		Not exceeding 45%	4%
Funding risk
• average debt maturity	At least 2 years		4.0 years
• proportion maturing within 1 year	No more than 30% of loans outstanding and unutilised credit agreements		11%
• average credit price tenor	At least 1.5 years		3.1 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		3.1 years
• maturing within 6 months	No more than 50%		43%
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 in Denmark and Finland		Achieved
• transaction exposure	Handled if exceeding MSEK 25		Achieved

Condensed Consolidated Cash Flow Statement

MSEK	2021 Jan–Mar	2020 Jan–Mar	Rolling 12 months April 2020–March 2021	2020 Jan–Dec
Net operating income	1,019	1,038	4,316	4,335
Central administrative expenses	–38	–37	–150	–149
Reversed depreciation	29	23	101	95
Net interest paid	–152	–135	–806	–789
Tax paid	–3	1	–181	–177
Translation difference of currencies	155	66	–45	–134
Cash flow from operating activities before change in working capital	1,010	956	3,235	3,181
Change in current receivables	–231	–275	–34	–78
Change in current liabilities	91	61	–129	–159
Cash flow from operating activities	870	742	3,072	2,944
Investments in new construction, extensions and reconstructions	–688	–568	–2,632	–2,512
Property acquisitions	–177	–75	–1,921	–1,819
Change in liabilities at acquisitions of property	127	–143	–34	–304
Sales of properties	9,879	—	10,770	891
Change in receivables at sales of properties	–4,635	–23	–4,829	–217
Investment in financial assets	–606	—	–3,048	–2,442
Other investments	–57	–26	–136	–105
Cash flow from investment activities	3,843	–835	–1,830	–6,508
Change in long-term interest-bearing liabilities	–3,131	1,982	232	5,345
Change in long-term receivables	–1	—	10	11
Swap termination	–156	—	–156	—
Repurchase of own shares	–383	—	–411	–28
Dividend paid	—	–888	–888	–1,776
Cash flow from financing activities	–3,671	1,094	–1,213	3,552
Cash flow for the period/year	1,042	1,001	29	–12
Cash and cash equivalents, opening balance	161	173	1,174	173
Cash and cash equivalents, closing balance	1,203	1,174	1,203	161

Parent Company

CONDENSED INCOME STATEMENT

MSEK	2021 Jan–Mar	2020 Jan–Mar	2020 Jan–Dec
Income	25	25	102
Costs	–58	–56	–216
Net financial items	–2	22	–8
Financing fees, acquisitions	—	—	–70
Dividend/Group	—	—	2,083
Change in values on derivatives	–16	–275	–57
Change in value, financial investment	491	—	—
Impairment/reversal of participations in Group companies	—	—	–70
Income before tax	440	–284	1,764
Tax	–5	6	–15
Net income for the period/year	435	–278	1,749
Items that will be reclassified into net income
Translation difference of currencies	69	174	–108
Unrealised change, currency hedge	–37	–221	44
Comprehensive income for the period/year	467	–325	1,685

CONDENSED BALANCE SHEET

MSEK	31 March 2021	31 March 2020	31 December 2020
Participations, Group companies	20,975	20,159	20,957
Receivables, Group companies	29,549	28,010	43,709
Financial assets	3,540	—	2,729
Other assets	10,327	12,874	114
Cash and cash equivalents	950	60	6
Total	65,311	61,103	67,523
Equity	16,570	15,575	18,384
Derivatives	720	506	1,132
Interest-bearing liabilities	40,654	41,302	43,318
Interest-bearing liabilities, Group companies	5,245	2,560	4,126
Other liabilities	2,122	1,160	563
Total	65,311	61,103	67,523
Pledged assets (receivables, Group contributions)	16,444	16,427	16,974
Contingent liability (guaranteed commitments for subsidiaries)	2,162	2,238	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.

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

	Effect on income,	Probable scenario
MSEK ±1% (points)		Boom	Recession
Rental level/index	+55/–55	+	—
Vacancies	+60/–60	+	—
Property costs	–17/+17	—	0
Interest costs1)	–153/+106	0	—

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	–19,163	–9,582	0	9,582	19,163
Loan-to-value ratio	51%	46%	41%	38%	35%

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 longterm 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.

Discover Castellum's turnkey offices

To meet the work life of the future with its increased demand for such things as flexibility, health and wellness, Castellum is launching its turnkey office concept. First up are carefully renovated premises in central Helsingborg, but in 2021 at least one turnkey office will be available in every region. With turnkey offices, the tenant can enjoy an office all of their own without any of the hassle. State of the art and fully equipped, with a focus on health, sustainability and wellness, the tenant can enjoy all the benefits of an office that is their own – all in one simple contract. Choosing an office has never been easier.

Turnkey means that everything is included, and the tenant can begin working from day one.

• Easy to move in Move in immediately. One simple contract covers everything.
• Easy to start working Everything is included. Furniture, kitchen and conference equipment, electricity, data networks, coffee and fruit, and cleaning.
• Easy to move out Three months' notice period. Always.

Welcome – stay as long as you like.

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 first quarter of 2021. As it was in 2020, support is targeted at especially vulnerable industries, and starts with property owners providing a possible rental discount of up to 100% for the first quarter, after which the property owner applies for compensation from the state for 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. Additionally, the government has signalled that the support will be extended for the period April–June 2021, but no decision has been taken.

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 40 of this liquidity relief is active; the remaining MSEK 105 has returned to customary quarterly notification. No discounts linked to the new state support have been granted.

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

COVID-19 has slowed activity in the rental market somewhat, with the primary consequence being a reduction in and postponement of renegotiations.

Castellum's projects are progressing as planned and a number of new projects were started during the quarter.

Sentiment among investors in the Swedish property market is strong, and interest in the property asset type remains high, though there has been some polarisation among various categories.

There has been an upswing in value in Castellum's portfolio, driven primarily by changed yield requirements for logistics/ warehouses/light industry and project gains.

Castellum has strong financial muscles, with unutilised credit facilities and cash and cash equivalents totalling approximately SEK 19 billion. At the same time, access to interest-bearing capital is still healthy.

Financial Key Metrics

	Jan–Mar 2021	Jan–Mar 2020	Rolling 12 months Apr 2020–Mar 2021	Jan–Dec 2020
Average number of shares, thousand (related to income statement key metrics)	276,172	273,201	274,366	273,628
Number of shares outstanding, thousand (related to balance sheet key metrics)	275,187	273,201	275,187	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 32.

Income from property management		Jan–Mar 2021		Jan–Mar 2020		Rolling 12 months Apr 2020–Mar 2021		Jan–Dec 2020
	MSEK	SEK/ share	MSEK	SEK/ share	MSEK	SEK/ share	MSEK	SEK/ share
Income before tax	2,896	10.49	630	2.31	9,294	33.87	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	–1,607	–5.82	–3	–0 ,01	–5,467	–19.93	–3,863	–14.12
Change in value on financial holdings	–491	–1.78	—	—	–491	–1.79	—	—
Change in values on derivatives	–19	–0.09	167	0.61	–66	–0.24	120	0.44
= Income from property management	779	2.82	794	2.91	3,365	12.26	3,380	12.35
EPRA Earnings (Income from property management after tax)
Income from property management	779	2.82	794	2.91	3,365	12.26	3,380	12.35
Reversed: Current tax, income from property management	–83	–0.30	–70	–0.26	–314	–1.14	–300	–1.10
EPRA Earnings/EPRA EPS	696	2.52	724	2.65	3,051	11.12	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

		31 Mar 2021		31 Mar 2020		31 Dec 2020
		MSEK SEK/share		MSEK SEK/share		MSEK SEK/share
Equity according to the balance sheet	49,921	181	42,623	156	48,243	174
Reversed:
Declared, undistributed dividend	949	3	888	3
Derivatives according to the balance sheet	720	3	506	2	1,132	4
Goodwill attributable to deferred tax	–1,480	–5	–1,480	–5	–1,480	–5
Deferred tax according to the balance sheet	10,416	38	10,279	37	11,376	41
Net reinstatement value (EPRA NRV)	60,526	220	52,816	193	59,271	214
Deduction
Goodwill due to acquisition of United Spaces	–193	–1	–211	–1	–193	–1
Estimated real deferred tax, 4%1)	–2,159	–8	–1,981	–7	–2,284	–8
Net tangible assets (EPRA NTA)	58,174	211	50,624	185	56,793	205
Reversed:
Derivatives according to above	–720	–3	–506	–2	–1,132	–4
Deferred tax	–8,257	–29	–8,298	–30	–9,091	–33
Net disposal value (EPRA NDV)	49,197	179	41,820	153	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 long-term 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

			Rolling 12 months Apr 2020–Mar
Interest coverage ratio	Jan–Mar 2021	Jan–Mar 2020	2021	Jan–Dec 2020
Income from property management	779	794	3,365	3,380
Reversed:
Net interest costs	195	200	781	786
Income from property management excl. net interest	974	994	4,146	4,166
Interest coverage ratio	499%	497%	531%	530%
Loan-to-value ratio	31 Mar 2021	31 Mar 2020		31 Dec 2020
Interest-bearing liabilities	42,824	43,544		45,720
Cash and cash equivalents	–1,203	–1,174		–161
Net interest-bearing liabilities	41,621	42,370		45,559
Investment properties	95,816	96,262		103,042
Acquired properties not taken into possession	–127	–161		—
Divested properties still in Castellum's possession	4,855	27		–220
Net investment properties	100,544	96,128		102,822
Loan-to-value ratio	41%	44%		44%

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.

CONT. NEXT PAGE

Financial risk

Net debt to EBITDA	31 Mar 2021	31 Mar 2020	Rolling 12 months Apr 2020–Mar 2021	31 Dec 2020
Interest-bearing liabilities	42,824	43,544	42,824	45,720
Cash and cash equivalents	–1,203	–1,174	–1,203	–161
Net interest-bearing liabilities	41,621	42,370	41,621	45,559
Net operating income	1,019	1,038	4,316	4,335
Central administration expenses	–38	–37	–150	–149
Operating income	+981	1,001	4,166	4,186
Net debt to EBITDA	10.6	10.6	10.0	10.9

Investment

			Rolling 12 months Apr 2020–Mar
Net investments	31 Mar 2021	31 Mar 2020	2021	Jan–Dec 2020
Acquisitions	177	75	2,748	2,646
New construction, extensions and reconstructions	688	568	2,632	2,512
Total investments	865	643	5,380	5,158
Net sales prices	–9,879	—	–10,770	–891
Net investments	–9,014	643	–5,390	4,267
Proportion of the property value, %	–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

	Rolling 12 months Apr 2020–Mar 31 Mar 2021 Jan–Mar 2020 2021 Jan–Dec 2020
Surplus ratio	68%	72%	73%	74%
Interest rate, average	1.9%	2.0%	1.9%	1.9%
Return on EPRA NRV	15.0%	4.1%	16.5%	13.4%
Return on total capital	11.2%	4.0%	9.5%	7.5%
Return on equity	32.6%	4.5%	21.5%	13.1%
Property value, SEK/share	348	352	348	372
Gross lettings	139	185	598	644
Net lettings	40	99	180	239

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.

Accounting policies Events after balance sheet date

In early April, Henrik Saxborn announced that he would be leaving the position of President and CEO in 2021.

Castellum has signed an agreement with Genesta to sell the Sundby Overdrev property in Copenhagen at a value of MDKK 778, which is on a par with the latest valuation from the fourth quarter of 2020.

The Board of Directors has decided on a repurchase of own shares by virtue of the authorisation from the Annual General Meeting of 25 March 2021. The purpose of the repurchase is to adapt the company's capital structure to the capital requirements in order to promote increased shareholder value. The maximum number of shares may be repurchased is such that after each repurchase, the company holds at most ten percent of all shares in the company. On 31 March 2021, the company's holding of treasury shares amounted to 2,075,494 shares, corresponding to 0.75% of the total number of shares in the company.

Gothenburg, 21 April 2021

Henrik Saxborn CEO, Castellum AB

This interim report has not been examined by the company's auditors.

This information is information that Castellum AB is obligated to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 8:00 a.m. CET on 21 April 2021.

The Castellum share

The Castellum share is listed on Nasdaq Stockholm Large Cap. At the end of the period the company had approximately 87,000 shareholders. The ten individual largest owner constellations confirmed as of 31 March 2021 are presented in the table below.

SHAREHOLDERS AS OF 31 MARCH 2021

Rutger Arnhult 65,656 APG Asset Management 15,656 BlackRock 13,503 Vanguard 7,981 AMF Pension & Fonder 6,752 Länsförsäkringar Fonder 6,385 Handelsbanken Fonder & Liv 5,660 Lannebo Fonder 5,300 Swedbank Robur Fonder 4,052 Szombatfalvy-sfären 3,631 Board and Executive Management Castellum1) 133 Other shareholders registered in Sweden 56,147 Shareholders registered abroad 84,332 Total shares outstanding 275,187 Repurchase of own shares 2,075 Total shares registered 277,263	Shareholders	Number of shares, thousand	Percentage of voting rights and capital
			23.9%
			5.7%
			4.9%
			2.9%
			2.5%
			2.3%
			2.1%
			1.9%
			1.5%
			1.3%
			0.0%
			20.4%
			30.6%
			100.0%

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. In the first quarter, we repurchased approximately 1,905,291,203 shares at an average price of SEK 200.9. On 31 March 2021, the company's holding of treasury shares amounted to 2,075,494 shares corresponding to 0.75% of the number of shares registered.

Share price and share turnover

The Castellum share price as of 31 March 2021 was SEK 192.60 (208.70), equivalent to a market capitalisation of SEK 53 billion (58), calculated on the number of shares outstanding.

Since the beginning of the year, a total of 45 million (83) shares were traded, equivalent to an average of 726,000 shares (1,314,000) per day, corresponding on an annual basis to a turnover rate of 66% (120). The share turnover is based on statistics from Nasdaq Stockholm, Cboe CXE EU, Turquoise and Cboe BXE EU.

Net asset value

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.

The long-term net reinstatement value (EPRA NRV) can be calculated to SEK 220 per share (214). The share price at the end of the period was thus 88% (98) of EPRA NRV.

Earnings

Income from property management adjusted for tax attributable to income from property management (EPRA EPS) amounted to SEK 11.12 (10.74) on a rolling annual basis. This results in a share price return of 5.8% (6.4) corresponding to a multiple of 17 (16). Income from property management must be adjusted for value growth in the long-term property portfolio and effective tax paid. Earnings per share after tax amounted on rolling annual basis to SEK 32.70 per share (17.54), which from the share price gives a yield of 17.0% (10.4), corresponding to a P/E ratio of 6 (10).

Dividend yield

The recent AGM approved a dividend of SEK 6.90 per share (6.50) corresponding to a dividend yield of 3.6% (3.9) 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.

DISTRIBUTION OF SHAREHOLDERS BY COUNTRY, 31 DEC 2020

Total yield

During the last 12-month period, the total return on the Castellum share, including dividend, was 18.5% (–3.4).

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.

EPRA KEY RATIOS

	31 Mar 2021	31 Mar 2020	31 Dec 2020
EPRA Earnings (Income from property mgmt after tax paid), MSEK	696	724	3,080
EPRA Earnings (EPS), SEK/share	2.52	2.65	11.25
EPRA NRV (Long-term net reinstatement value), MSEK	60,526	52,816	59,271
EPRA NRV, SEK/share	220	193	214
EPRA NTA, MSEK	58,174	50,624	56,793
EPRA NTA, SEK/share	211	185	205
EPRA NDV, MSEK	49,197	41,820	46,570
EPRA NDV, SEK/share	179	153	168
EPRA Vacancy rate	7%	8%	7%
EPRA Cost ratio incl. costs for vacancy	29%	26%	24%
EPRA Cost ratio excl. costs for vacancy	27%	25%	23%
EPRA Yield	4.5%	5.0%	4.8%
EPRA "Topped-up" Yield	4.6%	5.1%	4.9%

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.

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

–1% (point) 3,365 2.5%	+1% (point) 3,365
	4.5%
2,407	4,332
–405	–405
5,367	7,292
19.50	26.50
10.2%	13.8%
10.1%	13.8%
10	7

GROWTH, YIELD AND FINANCIAL RISK

	1 yr	3 years avg./year	10 years avg./year
Growth
Rental income SEK/share	4%	5%	3%
Income from prop. mgmt SEK/share	4%	9%	7%
Net income for the year after tax SEK/share	85%	19%	11%
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	5.6%	5.3%	3.5%
Yield
Return on long-term EPRA NRV	16.5%	15.3%	19.8%
Return on equity	9.5%	8.8%	8.0%
Return on total capital	21.5%	17.9%	16.6%
Total return per share (incl. dividend)
Castellum	18.5%	16.0%	13.2%
Nasdaq Stockholm (SIX Return)	60.4%	19.4%	12.9%
Real Estate Index Sweden (EPRA)	20.0%	18.4%	15.7%
Real Estate Index Europe (EPRA)	20.9%	3.5%	8.1%
Real Estate Index Eurozone (EPRA)	20.4%	1.0%	7.2%
Real Estate Index Great Britain (EPRA)	19.6%	0.8%	6.8%
Financial risk
LTV ratio	41%	43%	48%
Interest coverage ratio	499%	497%	381%

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 31 MARCH 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

31

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 the properties' fair value with deduction for acquired properties not taken into possession, and with addition for divested properties still in Castellum's possession, at year end.

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 96 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

Half-year report January–June 2021 15 July 2021 Interim report January–September 2021 19 October 2021 Year-end report 2021 21 January 2022

Castellum's 2021 Annual General Meeting

The Annual General Meeting on 25 March 2021, which was held solely via postal voting by virtue of temporary legislation, adopted resolutions including:

• A dividend of SEK 6.90 per share, divided into two payments of SEK 3.45 each, with Monday, 29 March 2021 and Monday, 27 September 2021 as the record dates.
• The re-election of current Board members Per Berggren, Christina Karlsson Kazeem, Zdravko Markovski and Joacim Sjöberg, as well as the election of Rutger Arnhult, Anna Kinberg Batra and Anna-Karin Celsing as new Board members and of Rutger Arnhult as the new Chairman of the Board.
• The payment of Board fees, including remuneration for committee work, totalling SEK 4,215,000.
• The appointment of Deloitte as the company's auditor for the period up to the end of the 2022 AGM.
• The inauguration of a Nomination Committee ahead of the 2022 AGM in accordance with the Nomination Committee's proposal.
• The remuneration report from the Board of Directors for 2020.
• The proposal of the Board on guidelines for remuneration to senior executives.
• Mandates for the Board of Directors to resolve on a new share issue and to resolve on the acquisition and transfer of treasury shares.

www.castellum.se

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

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