Castellum Stock

Good morning, everyone, and welcome to this presentation of Castellum's Q2 report. There will be a Q&A session in the end of the webcast. [Operator Instructions]

Let's start. Go ahead, Pal.

Thank you, Christoffer. And let's start with some highlights from the second quarter. Divestment to Wihlborgs, we sold all our properties in the Öresund region minus Copenhagen to Wihlborgs. Sales price was SEK 13.3 billion. We also sold the portfolio here in Stockholm with 2 buildings, and we sold it to Alecta, and the sales price was SEK 5 billion. And the sort of common denominator for both of those transactions were that we received a good price, and we think that we will not be able to meet our return targets given the price we achieved in those 2 transactions.

We have conducted -- continued to conduct share buybacks. So for the first 6 months of 2026, we have purchased 39 million shares for SEK 4.6 billion.

And on the leasing side, we -- Ericsson did not use its option to not lease the full Infinity, but they would rather -- lease the full Infinity, and we also made a leasing contract with Ericsson for 2 additional buildings in Hagastaden, Emerald House and Jubileumshuset. There are some conditions to those 2 agreements, so these 2 lease agreements are not a part of our net leasing this year and probably not until the end of next year in 2027.

Short introduction of Castellum, we have a property portfolio of SEK 134 billion. We also own 37% of the listed Norwegian company Entra. Currently, we have 5.2 million square meters and 650 (sic) [ 655 ] properties and around 500 employees. But that will reduce as we have the closing on the announced transactions.

We are working quite diligently with sustainability and not the least with reducing our energy consumption. And this first half year, we have reduced our energy consumption with 2 percentage points.

Net leasing, obviously, very important for commercial real estate company. And it's very nice to see a positive net leasing for the first 6 months of 2026, despite quite big terminations in the last quarter. But net leasing is SEK 110 million, and a lot of that is obviously driven by the Ericsson leasing of Infinity, which is around SEK 140 million.

If we move on to the next slide, you can see the net leasing excluding projects. And what you can see here is that it's still negative when you -- we remove the projects we are doing, but perhaps a bit better than it has been for the past 3 years. And this picture also gives us a nice bridge to the next slide, where we can see our vacancy, which is today is 87.5%. So it has increased a bit also in this quarter. But what we can see is that the vacancy rate or the occupancy rate has gone down, and this is all due to the net leasing that has been negative for quite a long time, actually.

And here some key figures regarding the contracts, roughly 1/3 in annualized terms there has been action in the contracts, 9% annualized figures has just been prolonged with no change in rent level and roughly only 3% has been renegotiated, and those terms have then been 4% lower rent level than before the renegotiation. And quite a big chunk has been terminated, 11%, in annualized terms. And that's -- a lot of that is actually driven by AFRY. It was a pretty big contract that was terminated during the quarter. But if you weigh in on prolonged and renegotiated leases, the change in rent level is minus 1%.

And here, on the next slide, you can see the in-place rent, the contractual value of our rent levels, how that has changed during the past year. We have disposed assets, and we have removed assets from the like-for-like, where we are making projects. And the like-for-like in-place rents have declined with minus -- declined with 1.3%. And that's mainly driven by an increased vacancy.

And, of course, with increasing vacancy, you get a negative income growth in the like-for-like portfolio and has been minus 2%, basically the same as we reported in the first quarter. NOI is also negative for the quarter -- for the period, full period, minus 4.8% negative income growth, but also a bit higher costs, mainly driven by a pretty cold winter, so more costs for snow removal and heating and so on.

Okay. Over to you, Christoffer.

Thank you. As Pal mentioned, we have been quite active on the transaction market in the first 6 months of this year. We have signed the deals totaling SEK 24 billion of value, which the large one being the divestment to AP7 signed in February, SEK 5.6 billion of public properties, the divestment to Alecta, signed a couple of weeks ago, SEK 5 billion of office properties in Stockholm and the divestment of our assets and our organization in Skåne, south of Sweden, to Wihlborgs, SEK 13.3 billion, also signed a couple of weeks ago.

In addition to that, we have signed a couple of smaller transactions totaling close to SEK 400 million in property value. Also, this is a mix, but mostly offices, one small one in Copenhagen, one small one in Malmö, one small one in Stockholm, a couple of ones in Linköping, different categories and different geographies.

The total signed divestment has been done at a value just below SEK 400 million -- SEK 500 million or 2% above fair value the quarter before the transaction was signed. We are, of course, more interested in the return we expect from the properties to give us in relation to the price we get rather than price versus fair value, but still worth mentioning, especially given the size totaling SEK 24 billion. And as I said, also a mix of property categories and a mix of geographies, so interesting, I would say.

In this table, we have also highlighted both the total profit, and that is including sort of all effects, including in the income statement. So also value changes in goodwill, tax effects, et cetera. So bottom line results. And we have also one line here, profit included in the report, which is what we have recorded in the income statement up until this report. And the difference, of course, will come in later reports.

Looking at our property value, it's SEK 134 billion as of this report. But in this figure, the Alecta and the Wihlborgs transactions are included, as they have not been closed yet. And if we exclude them, we have approximately SEK 116 billion of asset value. Please also notice that we, in the balance sheet in this report, have reported properties sold to Wihlborgs as assets held for sale. So they are not included in the line investment properties.

During the period, we have invested SEK 2 billion in our existing properties. Of this, SEK 1 billion is new construction, roughly SEK 600 million is tenant adoptions. Approximately, SEK 300 million is maintenance, and there are some smaller amounts, energy investments and other investments. And this is something new that we have added to the report. A couple of you guys have asked for it, and here you go.

Value changes in the period, plus SEK 236 million. And if you divide that, it was plus SEK 401 million in the first quarter and minus SEK 165 million in this quarter. It's roughly the value change in this quarter from the signed transactions. But then the rest, there is some big positive ones and a couple of minuses. And Infinity property is up quite a lot after the signing of the lease agreement with Ericsson.

The cap rate in our valuations is 5.7%. It has been quite stable over the last couple of years, and the value decline over those years has rather been lower cash flow expectations.

Loan-to-value, 37.3%, healthy headroom, I would say, against our financial policy, which is not to exceed 40%. We have, during the quarter, terminated our S&P Ratings. And the reason for that is that we believe that one credit rating is sufficient to support our new strategy.

Debt maturities on average 4.5 years, unchanged during the quarter. We have, during the quarter, refinanced SEK 2.3 billion of secured RCFs. We have issued SEK 3.9 billion of unsecured SEK bonds, a mix of 2, 3 and 5 years, average credit margin 99 bps. And we have also repurchased a number of shorter SEK bonds, SEK 1.7 billion in total value. Stable to decreasing margins, I would say, in both the bond and the banking system during the quarter. So still good financial markets.

Interest-bearing liabilities, SEK 57.3 billion, down from SEK 59.5 billion in Q1, and we expect this to come down even further, of course, when we close the transactions later in the year, and that we will reach somewhere SEK 49 billion to SEK 51 billion given that we will amortize approximately 40% of the Wihlborgs and Alecta transactions.

Average interest rate currently at 3.5%. That one is up from 3.1% in Q1, and that is driven by the redemption of 2 Eurobonds with low fixed coupons. And this was something that we had to do to be able to fully execute on our strategy and including the divestments of properties to Wihlborgs and Alecta. Those ones would not have been able -- we would not have been able to do those with the previous bond documentation.

And the total increase in running financial net will be approximately SEK 200 million on an annual basis. That's approximately SEK 50 million in the shorter bond and approximately SEK 150 million in the longer bond.

ICR, 3.2x. It's unchanged. Our policy is to have at least 3x. So headroom there as well. The ICR is stable to slightly decreasing due to the higher interest rates following this redemption of Eurobonds that I just mentioned. In the financial net, we can also highlight that we in Q2 had one-offs of SEK 48 million, SEK 31 million of those relates to this redemption of Eurobonds. And most of that is actually not a cash flow effect, but rather only income statement effect.

We have, during the first 6 months, bought back shares, as Pal mentioned, for SEK 4.6 billion. And with that, we concluded the share buybacks relating to both the AP7 transaction and results for 2025. Average price has been roughly SEK 117.

And as you might have seen, this morning, the Board decided upon a new share buyback program of up to SEK 3 billion, and that equals 40% of the proceeds from the Alecta transaction, and that is -- actually, 60% of the proceeds from the Alecta transaction, and that is roughly equal to the remaining part of the authorization that the Board has from the AGM because as of today, we hold approximately 5% of our own shares.

Income from property management per share increased 7.3% when comparing the first 6 months of this year with the same period last year. Then, we have, of course, bought back shares during this period for proceeds from the AP7 transaction, but that transaction was closed on 15th of June, so almost fully in the income from property management during the period. And looking at the last 12 months comparing with 2025, it's instead 3.5%.

Net asset value per share, here measured as EPRA NRV, has increased 4.6% since year-end. Roughly half of it is due to profit and roughly half of it is due to the share buybacks that we have executed below net asset value.

As most of you know, our overall financial target is a return on equity over a business cycle, above 10%. Taking the first half of 2026 and annualizing that figure, we are at 5.2%, far from the goal, but at least a step in the right direction, and we will continue to fully focus on this in everything we do.

And with that, it's time for questions.

[Operator Instructions] And the first question comes from [ Stefan Block ], SBAB Markets.

I have a couple of questions, starting off with the AP7 divestments. How much did that impact rental income in Q2?

Do I have actually that figure somewhere here? But as I said, with almost the full year -- or the full quarter, as we close it on 15th of June. I think in the press release, it was a preliminary closing date of 29th of April. But then, as I said in the end, it was 15th of June, so almost a full quarter. And if you give me 1 minute, I can perhaps -- I have to come back on that one.

Yes. No worries. I can move on to the next question, a bit more on the capital allocation. And at what share price level would share buybacks no longer be an attractive use of capital in your view?

We haven't really discussed that in the Board. It's quite a big difference still between the share price and the NAV. I think it's around SEK 40. So it has not been a topic. But of course, when approaching the net asset value, share buybacks won't be as attractive as it is right now. But I think we have some headroom still.

Yes. Okay. And following the Wihlborgs divestments, what distribution alternatives are you considering for the excess capital? Could you consider a mix of the dividend, buybacks or -- like, yes, what options are you considering?

I think we are considering all options. And -- but also as we have said, I think we wrote it in the press release today as well that today, we have decided upon the proceeds from the Alecta transaction and the proceeds from the Wihlborgs transaction will be at a later stage. But then, of course, we will sort of take all options into the equation and decide what's best at that point in time.

Yes. And since the closing is a couple of months ahead, we don't know where share price is moving and so on. So we -- it would be a bit stupid to make that decision right now. So we have to come back when we actually know where the markets are, when we are receiving the proceeds.

Understood. Makes sense. And next question after the announced divestments that you have made here, what share of the remaining portfolio still fails to meet your return requirements?

It's extremely difficult to answer that. It's much dependent on what prices we may achieve on the transaction market. But if we would look at the fair values we have today, it's -- I wouldn't say it's a big proportion, but it's a significant proportion of the portfolio where we probably would be better off if we could sell them at fair value. But as I think I write in the letter or in the CEO comment, it's tricky with fair values because there are very few comparables in the market. So they are guesstimates, but that's why we are discussing a lot with other property companies and other interested investors in what prices may be achievable actually in the transaction market. So -- but we do absolutely have a big chunk of our portfolio where if we would receive the fair value, we would probably be better off selling them. But that remains to be seen how much we will get for different type of properties.

Okay. And one final question for me. Do you see a broader base of buyers of your assets versus the beginning of the year? Or is it the same conditions?

I think already in the beginning of the year actually was a very large and broad interest in transaction markets. Perhaps, it's increased a little bit since then. But as I said, I think it was a very large interest already at that point in time.

Next one, Lars Norrby, SEB.

Question regarding net leasing, obviously, positive in the quarter, but negative excluding previously announced leases with Ericsson. And you're also, I think, saying something like conditions in the rental market remains sluggish. So looking ahead at the remaining 2 quarters of the year, what's your aim in terms of net leasing?

The aim can only be to work as hard as we can to get as many signed contracts as possible. Forecast for the demand is something that we can't do. We don't have that glass ball, so to say. So we don't know, but we can only do our best to sign as many lease contracts as possible.

Are conditions pretty much unchanged from a quarter ago in the market?

I think when I speak with people within the organization working with leasing every day. I think, in Stockholm, they say that there is more activity. We have signed more lease agreements than we did a year ago. And in other markets, in Gothenburg, it's still pretty weak, but it's not declining. It's perhaps has bottomed out. And in our regional cities, it seems like it's a bit sluggish still, but it's not declining at least. That's sort of the message I get when I speak with people.

And then regarding -- you have AFRY affecting the Q2 net leasing figure by negative SEK 95 million. Is that correct?

Yes.

And as that was -- I understand previously, it was known that, that was upcoming. Is there anything else remind us that you're waiting to come in terms of termination from any other tenant of size?

No, not in that size. No.

And then finally, jumping to different figure in the report, the SEK 84 million nonrecurring item in income in Q2. I think that was related to one of the property divestment, wasn't it? Is there anything more nonrecurring that you know now coming up in Q3, Q4 on that line?

No. Smaller ones. There are often smaller ones, but particularly, they are so small that we don't mention it and you don't notice them. That one was, of course, quite big. As I said, that one was related to one of the transaction -- one of the properties in the AP7 transaction. But in the Wihlborgs and Alecta transactions, no such effects or at least not of any size.

Next question, Nadir Rahman, UBS.

Three from me. So the first one, I'll ask in turn, you mentioned in the report that you see no reinvestment opportunities at suitable yields. So can I ask where are you looking for these reinvestment opportunities?

In all our markets.

Is that across offices, logistics, other asset classes as well?

It's in -- within the asset classes that we are operating.

And are there any that you are more interested in at this stage as you see are more likely to become suitable in the near term?

To be honest, no. We are looking broadly.

Okay. My second question then is you also mentioned that part of the value changes in the existing portfolio, excluding the disposals, you see the assumption of lower cash flows for part of the portfolio. Is this due to softer rents? Or is this due to occupancy declines or any other factors that is worth noting?

I would say it's a mix of both. We see no actual real growth in rent levels. It's rather flat, and then, slightly, what one could say, pushing forward of the decline in vacancy ratios in the property fair valuation discounted cash flows. So it's a mix of rental levels and occupancy.

And do you see these value changes concentrated in any particular region or asset class again?

No, not really. It's across the line, I would say, both office and light industry and logistics. Might be a bit better for retail, and we do have a small proportion there. But it's too small differences to say that it's a significant difference between the asset classes.

Right. And my final question is regarding the hybrid reset date that is upcoming in December. And of course, you've also terminated the S&P Ratings in Q2. So from the 40% of the disposal allocation that you've assigned to debt, do you see any of this being used for the hybrids? Or is this purely going to be used for more traditional debt?

We have seen it as more traditional debt.

Okay. And what is your thinking on the hybrids given the current market conditions, given that we are now less than half away -- half a year away, sorry, from the reset date?

Yes. As I said, the first call date is in December, and first reset date, March next year, something we are evaluating, and we will come back with both of how and when.

Next question, Fredrik Stensved, ABG.

Two questions, if I may. First, on the new table that you show in the presentation today of the sort of proportion of leases being renegotiated and terminated and the change in rental levels, et cetera. It seems like a fairly large change this year versus previous years when it comes to this change in rent level. Would you argue that this is due to a strategy shift, the new management team, et cetera? Are you more open to the idea of lowering rents to keep the properties occupied than previously? Or is there a change in the market?

Difficult to answer exactly what proportion you should book on, what account, so to say. But I would say that quality is about the market.

Understood. And then secondly, on leasing and occupancy, you previously stated, I think, several times that it will get worse before it gets better and occupancy has come down. Have all the major terminations primarily from last year? Now, are all of those reflected as of today? Or are there any significant move outs that you -- that still remains for the upcoming quarters and years?

All of the large ones from the beginning of last year is in these figures.

Next question, James [ Kettle ], Green Street.

I just had a question on the hybrid bonds, but that's already been answered.

Okay. Thank you, James. And I think that was the last question for today. So thank you all for listening in, and have a great summer.

Good morning, everyone, and welcome to this presentation of Castellum's Q1 report. There will be a Q&A session in the end of the webcast [Operator Instructions]. So let's start. Please go ahead, Pal.

Good morning. As you probably all know by now, we are -- the main target in Castellum is to achieve a return on equity of 10% over the business cycle. And during the autumn, we launched a new strategy, one could say, which we call Back to Basics. And one of the main principles in Back to Basics is to increase the transaction pace. And during the quarter, we conducted 2 transactions, 1 smaller in Linköping and 1 bigger with the disposal of 9 properties to AP7 with a profit of SEK 750 million. Another principle in Back to Basics is to be very prudent with the capital that the shareholders have given us. And if we can't return it, we will -- if we can't earn it, we will return it. And during the quarter, we have repurchased almost 24 million shares.

Another principle of Back to Basics is to have a tight grip on costs. And during the autumn, we sold our co-working operation called United Spaces, we've made a reorganization and cost cuts at the headquarters. And the administrative costs, both in property management and in central administration is lower this quarter compared to the first quarter 1 year ago, and it's almost SEK 100 million lower -- Swedish crowns lower. And of course, leasing, leasing, leasing is also one of the main principles in Back to Basics. It's still slow, but we had positive net leasing during the quarter, SEK 82 million, whereof SEK 72 million was the leasing to Ericsson in Hagastaden. So still slow but positive.

Castellum, our property portfolio valued to SEK 138 billion, but we also have 2 joint ventures. One joint venture in Gothenburg, Halvorsäng logistics together with the harbor in Gothenburg. And then we own 37% of the shares of the listed Norwegian office company, Entra. We have a mixed-use portfolio, mainly with office, but also a large proportion of warehouse and light industry and public sector properties, 5.3 million square meters lettable area and high sustainability focus. Now down to the details. So I hand over to you, Christoffer.

Thank you. So looking at income and net operating income, both are down by some 3% compared with last year -- Q1 last year. This is mainly due to higher vacancies, but also higher direct property costs. However, with lower central administration, SEK 24 million this quarter, SEK 66 million last quarter, and in addition to that, somewhat lower interest costs, some SEK 10 million and a better contribution from Entra of SEK 17 million. This at least leaves us at positive territory in terms of income from property management. Property values were positive, SEK 416 million or 0.3% and as Paul mentioned, the net leasing for the period is SEK 82 million, whereof the large leasing in Hagastaden to Ericsson is most of that. Occupancy now at 88.0%, somewhat lower than the last quarter. And on the investment side, we have net investments in the quarter of SEK 679 million. Of this is SEK 886 million investments in existing properties and then we sold properties for SEK 214 million. So not including the large AP7 transaction, but this was transactions we made and communicated in the end of last year. The biggest one is in group.

Into more details, income in the like-for-like portfolio decreased by SEK 47 million, and that corresponds to 2%. And that is mainly due to higher vacancies of SEK 60 million compared to last -- the quarter last year. Both income and costs are affected by this divestment of our co-working business. So this is the first full quarter without that business. So income decreased by some SEK 45 million and cost decreased by some SEK 53 million. So that is a quarterly net positive effect of SEK 8 million, in line with what we announced in October when we sold the company that we indicated a positive yearly effect of SEK 30 million, that's quite spot on.

On the cost side, the like-for-like property costs increased with SEK 45 million. And of this SEK 38 million was due to higher cost for heating and snow due to the colder winter than the year before. And as Paul mentioned also looking at administration costs, and if we add both property administration and central administration, costs are down SEK 99 million. However, half of that SEK 53 million is related to this sold co-working business. And then please also note that we have SEK 22 million of costs that we have moved from central administration to property administration. And this is part of that changes we did in the autumn where we both reduced costs on the headquarters, but we also moved some staff to the regions. I would also say that we, in this quarter, has had no material one-off, which we, of course, had quite a lot of in Q4.

Looking at the leasing side, 14% of the total lease that were up for renegotiation were renegotiated during the period with an average negative change in rent of 7.1%. It's quite small volume, and it's no specific or individual rental agreement behind it. It's actually a couple of them. As usual, the largest proportion are extended but no changes in terms. This quarter, about half of the volume, 49% or SEK 249 million is rolled over with no changes in terms. And net leasing, as mentioned, SEK 82 million in addition to the Ericsson deal that we have talked about, we can also mention that we have some positive net leasing in Denmark of some SEK 20 million, and we have some positive net leasing in the Mälardalen region of SEK 18 million, and that is roughly the amount of new leasing to light industry.

Looking at property values, as mentioned, they are up with some SEK 400 million, mainly due to the Infinity project in Hagastaden, some SEK 300 million plus and also the divestment of 9 properties to AP7, approximately SEK 250 million up. That was also communicated in the press release in that transaction. So if we take those two away, the remaining part is actually a little bit lower than the last quarter. SEK 138 billion of fair value. And this then, of course, includes the SEK 5.6 billion transaction with AP7 as that one is closing in Q2 or a smaller part of it is actually in Q3, but the big part in Q2. Also in this quarter, we have actually lower cash flow expectations in our valuations, and that's the downward pressure on rental levels. That's the explanation to this smaller negative value changes if we exclude Infinity and AP7 transactions.

Looking at the financing side, market conditions remain favorable despite increased volatility. We saw some credit spreads widening during the quarter as the conflict in the Middle East escalated, but we have recovered continuously during the quarter and now in the beginning of Q2 and spreads in the bond market are some 10, 15 bps wider than the lows before the conflict started. Nordic banks continue to offer very competitive pricing and are willing to increase volumes. And it's also on this side that we have been active in the quarter. So on the secured side with the refinancing of in total SEK 6.8 billion in bank loans. The average duration of those loans has been just over 8 years, so quite long credit duration in the bank loans that were offered currently. And that is also contributing to the increase in our average debt maturity. We still have some SEK 18 billion in cash and unutilized credit facilities and providing us with sort of comfortable backup to the upcoming maturities, which are, I mean, not very big.

Financial key ratios, broadly stable compared to previous quarter. However, a slight increase in the loan-to-value now at 37.5%, mainly explained by the fact that we have bought shares in the quarter of some SEK 2 billion, while the proceeds from the transactions comes in Q2. ICR stable at 3.2x and comfortable headroom against policies of 40% LTV and 3.0x ICR. As mentioned on the previous slide, average debt maturity is slightly higher, 4.5 years, and the average fixed interest term is 3 years. Interest-bearing liabilities slightly up, same explanation, a bit higher due to the mismatch in acquiring shares in the quarter and proceeds from the transactions in the next quarter. Looking at divestments, we have done, as mentioned, two larger transaction -- one large transaction and one with a small transaction. And the last one we have talked about quite a lot already, SEK 5.6 billion public assets 100% leased out, sold to AP7. Fair value as of Q4 was SEK 5.15 billion. So the earnings -- total earnings effect was SEK 715 million, and that one is closing in Q2 and Q3.

The smaller one, maybe not small for the Linköping market, SEK 256 million sold to the Åman family, a big different, 25% vacancies from our perspective, quite a lot of investment needs in the portfolio going forward and a good transaction from our perspective. An update on the share buybacks that we are conducting. After the divestment of the portfolio AP7, the Board announced that we are initiating a share buyback program in total of SEK 3.4 billion and of that, we have so far acquired for SEK 2.7 billion. That is up until today or yesterday evening at least. And out of that, some SEK 2 billion was acquired during the quarter and then the remaining one now in April. Average price, SEK 113 per share. The large lease during the quarter, 24,000 square meters in Hagastaden, the entire building and we have 15-year duration. Then it includes an option for the tenant up until 1st of June this year. So roughly in a month, we will know that they have the optionality to decrease it to a 5-year tenant with approximately half of the volume.

And to wrap things up, some words on our sustainability performance. The day-to-day work to decrease our energy consumptions goes on as previously. And during the quarter, we have reduced the energy consumptions in the like-for-like portfolio with 4% and roughly 1/4 of our electricity is self-generated mostly by solar panels. And before we let all the questions in, let me summarize a bit. We have positive net leasing, SEK 82 million, whereof SEK 72 million from Ericsson. So it's the fourth quarter in a row with positive net leasing, but very low figures, one could say. So it's still -- it remains slow in the leasing market. We made transaction -- 2 transactions very successfully, I would say, and that's part of the Back to Basic principle to remove everything that we don't believe will give a 10% return on equity. And the cost savings program we conducted during the autumn now comes into the figures. So with that, I think we can hand over to questions.

[Operator Instructions] The first question comes from [indiscernible].

First, I have a couple of general questions. Regarding your portfolio, is it possible to, in some way, quantify how large proportion that you think that doesn't meet your return requirements?

Not really. I think we are looking at that continuously. And one thing that's very important in that equation is actually what prices you can achieve. So it's difficult to answer that question. But I would say there's a big proportion that actually can achieve 10%. And there's a proportion also that, I would say, is borderline. And then there's a proportion that probably not depending on prices that not will meet our 10% return requirement. But I cannot give you a figure on that right now.

That's fair. But kind of a follow-up, how does that view impact your view on projects? I mean, if you complete the project with a long lease to a stable tenant and it's fully let, is it possible to keep -- to continue to own those kind of properties? Or should that properties be sold as they are completed? Or do you kind of give promises to the tenant that you will remain as a long-term owner, so you can't sell it?

The last question that's very uncommon that you have to promise tenants that you keep something forever and ever. So I wouldn't say that, that's a question. If we complete something and obviously, then the property is in its prime. So the demand for those type of properties may very well in different markets, depending on the market and interest rate may be very high. But it's from case to case, I would say.

Okay. And regarding your renegotiations, even though it's a small number, is it related to some specific region or some specific category?

No, actually not. It's quite a lot of the different underlying rental agreements, actually it different categories and different geographies. So that's unfortunately not...

Okay. And regarding your admin expenses, both the level of expenses for central admin in Q1 and the movement from central admin to property admin in Q1. Is that like a reasonable level also for coming quarters? Or are there some seasonal variations in those numbers?

No seasonal variation. So that's roughly in line with the expectations, although we, of course, not guide on it, but it's quite clean, so to say, no one-offs in...

And the next question Lars Norrby, SEB.

A question about buybacks. By the way, I love your comment there. If we can't earn it, we will return it. You still have some way to go on the SEK 3.4 billion buyback program that you have. And on top of that, I guess you have the capital distribution for '25, a few hundred million on that one to do even more than that, but does that necessitate more divestments of properties?

At least, we do not have any plans for more that should we not do any more divestments...

And you've done some quite sizable divestments, the SEK 5.9 billion and close to SEK 300 million or so, but still your total portfolio is something like SEK 138 billion. Why haven't you been able to do more? I guess you want to do much more than that. Isn't that true?

I can -- what we see right now, I would say that we see quite a big interest in general on the property transaction market to make transactions. That's quite clear. More in detail than that. I don't think we can answer more in detail than that. But we have discussions with interested parties. And as soon as we have something to tell, we will definitely tell.

Next question, Nadir Rahman, UBS.

Yes. So I have 2 questions from me. The first one is in your report, if we look at the value decline in the markets that you mentioned have lower expected cash flows, I'm assuming this is firstly not Sjisjka [indiscernible], which you said you took value declines on in Q4. So can you give some more color as to where this decline was concentrated? Then I can ask my second question after this.

Not really any concentration to that. You are correct that Sjisjka and Finland was more Q4. So this is more broadly across the portfolio.

Okay. And the second question is on the slight decline in rental income and of course, and occupancy as well, and you're mentioning that this is largely due to the effect of the legacy like negative net lettings from last year. When do we expect this to start to inflect and we start to see a more positive effect from any positive lettings from the last 4 quarters? Do you have perhaps an indication of when we see that inflection?

We don't really have that indication or maybe we have that indication, but we don't guide on it. What we could mention is, of course, that Q1 last year was very negative net leasing wise and then at least positive, very small figures, but positive Q2, Q3, Q3 and Q4 and now positive again in Q1 this year. But we can't give more details than that.

Okay. Very clear. And sorry, just to come back to my initial question on the value decline. Instead of any regional concentration, is there any asset class, for example, offices or any other sector that you see this value decline in occurring in more?

Not really there either. It's actually in different asset classes. I mean, quite small volume in the big perspective, I would say.

Next question from John Vuong, Kempen.

In the previous energy crisis, Castellum wasn't really fully hedged against electricity costs. With the war ongoing, could you provide a bit more color on how well you're now protected against a surge in electricity prices?

Yes. We changed that a couple of years ago to a more -- maybe more normal, I don't know, but at least a different hedging strategy, more classic 80%, 60%, 40%, 20% strategy. So I would say better hedged, not fully hedged, but better hedged and quite sort of evenly over a couple of years.

Okay. That's clear. And just on the share buyback, I think in your latest press release from this week, I noticed that there were no repurchases done on Friday and Monday. I suppose that also coincides with the share price above SEK 125. Could you provide a bit more color on this?

That's correct. That was -- I mean, as of lately, we have bought back shares through this safe harbor procedure as we have been in close period and then we instructed the bank of that share price maximum.

Okay. And then just lastly on the occupancy. I noticed you restated several numbers. Could you highlight what has changed and why it has changed?

Could you repeat the question?

On your occupancy definition, I noticed you restated some historical numbers in the quarterly reporting. So what has changed in the definition of occupancy? And why did you change it?

What we have changed is that previously, we -- our occupancy was for the full period, now we have changed it into end of period. And the reason for that is that we think that's more accurate, especially when you come to the end of the year when you are very much affected by the vacancy level in the sort of first quarters of the year. I think that's more common that the vacancy figure or occupancy figures are end of period figures.

Next question, Paul May, Barclays.

Just a couple of quick ones from me. You mentioned obviously looking at disposals and selling assets where you don't hit your return requirements. Just wondering who would be the buyers of those assets because there's not many buyers or much capital out there that's looking for the low returns that you would anticipate on those assets and hence, you're trying to sell them. Just wondering if you could give some color on that would be great.

And then secondly, on the operating environment, I appreciate it's not particularly easy out there. And as you've highlighted, it's quite tough. I think you've talked about improving the leasing environment, improving the operating metrics. So when should we expect those to actually flow through into real numbers in terms of occupancy and NRI growth, which seems to be getting worse rather than better. Is it to do with your weaker assets or weaker locations? Or do you just think it's a market-wide soft leasing market that just requires time before that starts to improve?

I can start with the first question. We actually disagree a bit. We think it's plenty of interest out there, plenty of capital out there interested in a very large proportion of our assets. And I would say that's from different kinds of capital or investors as well, local and foreign institutional and private listed real estate companies and private equity funds and not at least Swedish institutions. So -- we think it's very much interest in the transaction market.

And regarding the operational figures, vacancy and like-for-like growth, I would imagine we are not guiding, but I would imagine that we will continue to see a pretty slow market for a while. We haven't seen any turnaround as of yet anyways. So until we reach sort of a new equilibrium where we are, we probably will see figures that are a bit on the down slope before it turns. And this was also, I think we indicated that during the autumn that it will get a bit worse before it can improve. But now we still have -- we at least have positive net letting even if it's dancing around 0, but it's still positive. But we are not seeing a rapid increase in demand for our properties in the rental market as it is.

Next question, Pranava Boyidapu, sorry if I'm pronouncing it wrong, also Barclays.

I'm Paul May's credit analyst. On that note, I would like to get a little bit more clarity on what your -- if you can't earn it, we'll return it policy means for the bondholders because again, at the cost of sounding repetitive, there are some loose ends with the consent solicitation that didn't go through specifically for the Castellum 29 Eurobonds. So I was just wondering what does it -- at what point in your business plan, does it seem like you have -- you could potentially consider the bondholders on the side of the cessation of business event?

Same answer that we have said before that we -- if and when we come to that point in time that we are having such transactions sort of on the table, then we will handle it at that point in time.

And then I have a second question regarding your hybrid debt, which is, I believe, SEK 1 billion with the first call next year. I was wondering if you had any plans in terms of how you expect to refinance it considering the size of it. And I assume that the hybrids will remain a part of your capital structure, if there are potentially different currencies you might consider? Or is it going to be euros?

Also on that one, we will announce our plans sort of when we have decided on our plans. Thank you. And that seems to be the last question of today. So thank you all for listening, and thanks for the questions.

Yes. Thank you and until next time.

Good morning, everyone, and welcome to this presentation of Castellum's Q4 report. From our side, it's myself, Christoffer Stromback, acting CFO; and Pal Ahlsen, CEO. There will be a Q&A session in the end of the webcast. [Operator Instructions] So let's start. Please go ahead, Pal.

Thank you, Christoffer, and thank you to all that are phoning in. I would like to start with saying that I've been here for almost 6 months, and I've got a very warm welcome from all of our staff. I'm very thankful for that. But also from shareholders that have reached out with questions, challenging questions, and also very good advice. And I hope that will continue going forward because that's something that actually makes Castellum better being challenged by our shareholders. So I really appreciate that.

And the focus for us the past 6 months has been back to basics, the sort of the new strategy of Castellum. And the focus is crystal clear. Our target is to deliver a 10% return on equity over the business cycle. So that's really been what we've been working on for the past 6 months. It's all about taking away things that are not relevant, that are unnecessary. And it's all about leasing, increasing our -- decreasing our vacancy rate, increasing our occupancy rate. And it's about cost control, reducing our costs, both in administration, but also in our operations.

And we have also gone through our portfolio to see which properties are winners that we can keep in the long term and properties that are struggling a bit more, where we either have to change our business plan or we actually have to leave them to someone else who has other ideas or other visions for the future than we have. But that has been really the focus for the past 6 months, and we call that back to basics.

So one of the things we've done, which I mentioned was decreasing costs. And unfortunately, we were in a situation where we had a bit of a too big of a costume, which led to staff reduction, unfortunately, during the autumn where 30 people had to leave Castellum and that costed us around SEK 40 million during the fourth quarter. We believe though that the savings will be roughly the same amount going forward due to that action.

One of the key things for us is having room to maneuver when it comes to the portfolio, freedom to change the portfolio. Without that freedom or without that room to maneuver, it will practically be impossible for us to reach 10% return on equity. And we had some writings or conditions in our bond agreements, which we addressed in the end of last year. It's called cessation of business, which sort of limited our room to maneuver. So we asked the bondholders if we could change those conditions -- terms and conditions. And most of them agreed to that in December. But that also came in with a cost of roughly SEK 30 million, and that's also something that is in the fourth -- in the report we are talking about today.

Property values are down SEK 2.5 billion last year and SEK 1 billion in the fourth quarter. And the main reason for the value changes are changes of expectations of future cash flow, which is mainly due to changes in long-term vacancy and rental prices or rental levels. And in the fourth quarter, SEK 1 billion in value changes, negative value changes with mainly Kista, SEK 0.5 billion. Kista is a small proportion of our portfolio, well known in Sweden, I would say. So it's often written about it in the newspaper, and we have roughly 130,000 square meters in Kista, and it's around 2% of our portfolio, but it's struggling a bit with vacancy. And that's one of the challenges we have within our portfolio. And Finland, we have also changed sort of the expected long-term vacancy, which has led to a reduction in property value of roughly SEK 200 million.

Net leasing for the year was negative SEK 140 million. Most of the negative event was actually in the first quarter where net leasing was down SEK 184 million, and that was mainly 2 events. It was Boost in Malmo and the bankruptcy of Northvolt. Since then, the quarters 2, 3 and 4 has actually been positive, but not as positive as the negative events of the first quarter. So net leasing SEK 140 million negative. Many people obviously ask if we can see a turnaround. We obviously hope so, but our focus is leasing, leasing, leasing. Time will tell if there has been a turnaround or not.

One of the things we've launched now actually in January is what we call Castellum Business School. We believe that we need to raise the awareness within the company on how to understand the strategy, for example, but also to increase efficiency in the property management, in project management and in leadership and things related to the Castellum business. So we launched the Castellum Business School in January. All staff will get relevant education given their occupation, but also 150 people have been selected to do the Castellum Business School MBA, including calculation, leadership training and so on and so forth. And we believe that, that will be positive contribution to our aim to reach 10% return on equity.

And my final point here in the intro is the fact that the Board is proposing share buybacks instead of dividend, and that's in line with our new policy for capital distribution. And we think that is a wise thing to do today when the share price is where it is in relation to the net asset value. We can actually skip -- go to the next slide and just give you a background on Castellum.

We are a listed company, obviously. We have property value of roughly SEK 137 billion, where most of it is in major cities in Sweden, Stockholm, Gothenburg and Malmo. But we also have a strong presence in regional cities, growing cities like Orebro, Linkoping and Vasteras. And we have a portfolio also in Helsinki in Finland, roughly SEK 6 billion and SEK 5 billion in Copenhagen. And then we have a pretty significant stake in a Norwegian company, office company listed where we have almost 38% of the shares, 5.3 million square meters and a yearly contracted rent of SEK 9.3 billion and high sustainability focus. Christoffer?

Yes. Thank you. So summarizing the full year 2025 and comparing it with the same period last year, it is negatively affected by mainly divestments and higher vacancies that is shown in sort of all of the results figures on this page.

In addition to that, and as Pal mentioned, negative value changes of the properties, SEK 2.5 billion for the full year and SEK 1.1 billion for the fourth quarter, minus 1.8% for the full year. This all summarizing gives a return on equity of 1.2%, which, of course, is much lower than our target of 10%.

Net leasing, Pal also mentioned, minus SEK 140 million, very negative one in the first quarter and then 3 quarters after that positive ones in the fourth quarter, plus SEK 26 million. Occupancy fairly stable, 89.8%, roughly the same as last quarter. And we have, during the year, invested quite a lot, SEK 4.4 billion, a combination of investing in our properties is going to make most of it. And then in addition to that, we also made some acquisitions during 2025. Pal mentioned a few one-offs. We have a couple of one-offs in Q4 isolated, both positive ones and negative ones, and we will try to go through all of them during this call.

So looking at it in more detail. In the like-for-like portfolio, income increased by SEK 26 million, that is 0.3%. Index contributed with SEK 140 million, but it's offset by higher vacancies of SEK 190 million. Then we have one of the first one-offs, which is SEK 58 million one-off relating to a reversal of accrued annuity for the Northvolt. That's a difficult one. We took the full net leasing -- negative net leasing in Q1. But then now in Q4, we sort of concluded the final parts of the rental agreement with the bankruptcy estate. And then we had no cash effect, but an accrued one that we reversed during Q4. So that was a positive SEK 58 million in Q4.

Direct property costs like-for-like increased by SEK 58 million corresponding to 2.7%. We have a mild winter. Now we're talking Q4, not what we have seen after Q4, but in Q4, mild winter. The cost for heating and snow removal was actually decreased compared to last year. But then we have -- and that was offset by some higher rental losses. And we also during Q4 isolated took a couple of larger wasted projects or projects that we are not expecting to go through anymore. So one-offs of that one recorded under maintenance in Q4.

Central administration and property administration in total increased by SEK 54 million. And here, we have another one-off, Pal Mentioned it. Approximately SEK 40 million of those SEK 54 million is one-off relating to the staff reduction and head office reorganization.

We can go to the next slide, please. So looking at the leasing renegotiations of SEK 279 million, that is 11% of the total leased stock up for renegotiation, fairly the same rent as before, a decrease of 0.1%, so very flat. But as I said, quite low volume of the total stock up for renegotiation. And the very large -- bulk of it, 62% or SEK 1.6 billion is actually just prolonged at the same terms as before, that is something I think is very much worth mentioning.

Net leasing, we have been talking about already. And here, you also have the figures in the graph up to the right, showing that, as mentioned, a very big part of it was a negative one in Q1 and the very big part of that was the Northvolt bankruptcy. And then we have 3 positive quarters, not big figures, of course, but at least positive.

Property values, we have been through most of the figures already actually, so SEK 1.1 billion down in Q4. Stockholm stands for SEK 0.9 billion of that and Finland SEK 0.2 billion. And as Pal mentioned, of the Stockholm SEK 0.9 billion down, SEK 0.5 billion is related to Kista. Valuation yield fairly flat, 1 bps up from last quarter, 5.64%, fairly stable. I think we take the next slide out.

Looking at the financial highlights and our funding situation. Overall, the funding markets where we are present, i.e., the banking market, the SEK bond market, the Eurobond market as well as the hybrid market are all very favorable at the moment, I would say. So very good market conditions, credit margins at good levels and very much liquidity in all of the markets.

Current spreads in the domestic or SEK market is some 80 bps for 3-year money; some 110, 150 for 5-year money. Banks offer us typically 5-year money, 110 to 130 bps, also at good levels, good volumes. I would say that most of them are -- maybe all of them would like to increase their positions. So that's very good. And during Q4 isolated, we did not actually do that many funding actions. We made one bond, SEK 1 billion, 122 bps, 5.25 years, bought back some bonds at the same time. And then as Pal mentioned earlier, we made this constant solicitation. Overall, we got the results that we were expecting. So that's good.

Average interest rate, 3.1%, stable compared to last year, actually down a little bit since the year before, and we see potential for actually reducing this a little bit going forward.

Also on the financing side, we have a couple of one-offs. Together, they are approximately SEK 50 million. And as Pal mentioned, SEK 30 million of them are connected to this consent solicitation. And then we have an additional lease, approximately SEK 20 million for refinancing and early redemption, both coupled to loans and bonds. Quite large one-offs in the financial items as well.

And on this slide, we have our financial key ratios. Very stable, I would say, small changes compared to last quarter. Loan-to-value of 36.5%, ICR 3.2%. Good headroom to our policy. We have LTV policy of 40%, ICR policy of 3x. So good headroom there. At the beginning of this year, S&P confirmed our BBB flat with stable outlook about what has happened on the rating side. Debt maturities still stable, 4.3 years. We are quite happy with our funding situation and our key ratios. And I hand over to you, Pal.

Yes. One of the things which we are very good at, I would say, in Castellum, and it's the reduction of energy consumption within our properties. So last year, we actually reduced the energy consumption in our portfolio with almost 7%. And that's one of the things I really like about Castellum is this key focus on reducing costs for energy, but then also from a sustainability perspective. So that's something to be very proud of. 58% of our portfolio is sustainability certified, and we actually have 24% of our electricity generated. So a high level of sustainability within Castellum, something to be proud of.

[Operator Instructions]

And the first question comes from Jan Ihrfelt, Kepler.

Actually, I have 4 of them. And I'll start with the sentiment on the rental market, office market. Have you seen any change in Q1 compared to Q4?

Reluctant to speculate, and it's very early actually in the quarter to say anything about that. When I speak with the staff in the offices, I can say they still say that it's a challenging market. So our only focus is to do whatever we can to reduce vacancy.

Okay. And next question, you had a net letting figure for the full year of minus SEK 140 million. And I'm just a little bit asking about the overhang into 2026. How much of this SEK 140 million has already hit the P&L?

We actually don't have a specific figure on that one. I mean, typically, there is a lag, as you know. And in this case, it's very much so where we got -- a big portion, as you know, in Q1 was in Northvolt and we have actually paid rent for the full year 2025. Not all of the volume, but quite a lot of it, and that is coming in with full effect into '26, but we don't have that figure.

No, exactly. Okay. And bringing down vacancies 10% and I'm just looking at some kind of time frame here. When -- at what point in time would you get down to 5%? Have you any time frame there?

That's an impossible question to answer. And it's -- we are not doing that type of forecast. But as -- I think I mentioned that in the Q3 report, but we know that it will probably be a bit worse before it becomes better in relating to the previous question. But we are not making any forecast when it comes to vacancy ratios.

Okay. And my last question regards the one-off, the SEK 40 million. And where is it recorded? Is it all in central administration? Or is it split to some other lines?

It's a split between central administration and property administration.

Yes. And the ratio there between them?

I don't have that ratio actually. I can come back on that.

And the next question, Lars Norrby, SEB.

Part of your Back to Basics strategy is to "divest noncore assets." So far, since you assumed the role as CEO, Pal, you haven't done that much. I think there was some SEK 300 million completed in Q4 and you announced through a press release an additional SEK 500 million, which in the context of a portfolio of SEK 137 billion is not that much. And then you also mentioned that you made some changes to your bond terms in the fourth quarter. My first question is, is there anything now holding you back from finding significant divestments?

No, I wouldn't say so. The transaction market is quite good, I would say. Christoffer mentioned that the market for lending money is very favorable right now. So it's a huge interest actually in making transactions in the property world, and we see -- we have lots of discussion, people reaching out to see to find a deal. But nowadays, if I may, reminiscent of how it was 30 years ago, transactions went much faster than they do today. The due diligence phase in making transactions are so much more due diligence, so to say. So even if I wish that we had a higher pace, that's not how the business works nowadays. But I can assure you that we are doing everything we can to reach this target of a high transactions.

Okay. And my second and final question is what is a noncore asset in your portfolio?

To be quite honest, I never ever used the word core or noncore. So I never said that. Our core assets are the ones we have, I would say. Some of them are perhaps giving a too low rate of return given our expectations of the future. So our core assets are actually commercial real estate in Sweden. It might be hotels, it might be offices, it might be logistics or light warehouses and so on and so forth. So I never actually used the words core or noncore. So we are more, let's say, looking at what we believe that they can give us in return going forward. And those who are helping us in reaching our target, that's our core assets. That's not office, that's not that, that's not this. So that's how we're thinking about that.

Thank you, Lars. Next question from Nadir at UBS.

I've got a few, and I'll ask them one by one, if that's okay. So firstly, you're saying on your capital distribution, you are now allocating your full distribution to buybacks rather than dividends. And I think, Pal, you mentioned "simple mathematics" in your presentation. So if there is a simple way to split it then, is your thinking that if you're trading at a discount, you then do buybacks. And if you're trading at a premium or closer to that, you're doing dividends? Or is there a more nuanced way that you're looking at this distribution policy going forward? Isn't really that simple?

I would say it's really that simple, even if you can make it a bit more complicated. But now the discount is quite big, right? It's 32%, 33%, and then you don't have to think about it that much. But once and hopefully, when that gap closes, we have to have a deeper discussion when it's time to switch to dividend from share buyback.

Got it. Okay. And a quick follow-up to that as well. What is your exact execution plan on the buybacks through the year? So I know it's SEK 1.2 billion. It isn't a small proportion of your market cap. So how do you propose you perform the buybacks this year?

Our thinking is that we should wait until after the AGM. We think that we should adopt the financial results for 2025, i.e., part of that results that we are distributing to our shareholders. So we will wait until AGM and we will come back with details after that.

Okay. Got it. Very clear. My second question is, I won't be using the word core and noncore, as Pal mentioned, but looking at some pain points in the portfolio such as Kista and Finland, where you've taken more substantial write-downs in values and also they have elevated vacancies. What is your thinking on these regions and generally, your focus on trying to become more Sweden-centric. I think that's something you mentioned in your Q3 report?

More Sweden-centric, I wouldn't write that. I would say, continue -- we are already Swedish centric. So that's not a change, I would say. Well, Kista, it's a small proportion of our portfolio. It's very well known in Sweden. That's why we highlight it. It's struggling. It has been struggling for a long time. We are picking our brains, finding a way to reduce vacancy and make a turnaround in Kista. And I would be quite honest to say that that's not an easy nut to crack, but we are really working on that.

Vacancy, 22% in our portfolio, probably in Kista, perhaps more than 30%. So it's a challenging market. But again, a small proportion of our portfolio. And again, we are really picking our brains, trying to figure out how to make a turnaround, at least for our properties in Kista.

Finland, yes, it's also a challenging market just as been in Stockholm, Gothenburg and Malmo and Copenhagen and to some extent, also in Oslo. Again, we are also trying there to find ways to reduce vacancy and keeping rent level to minimal just as we do for Kista.

That's very clear. My third question is then moving to a different part of the Nordic region, Entra and your stake there. I think you mentioned that it's a fairly attractive market in Norway at the moment despite the swap rates being slightly higher, inflation is more elevated relative to, let's say, Sweden and Finland. So what is your thinking on the Entra stake going into this year? I know there was an increase in the stake in Q1 last year. So are there any thoughts on this?

I really like Entra. Entra is a great company. I think Castellum can probably learn quite a bit from Entra. So I appreciate the cooperation we have with Entra. Obviously, it's not an optimum situation. I think where we have the stake we have, Balder has its stake has. It's a low free float for other shareholders. So perhaps it's not the best long-term solution. I don't have any answers to the long-term solution today, not at all. But what one should say is that Entra is performing quite well. So it's not hurting us in any way, having that stake in Entra because it's a good company. They have a nice portfolio, nice management. And so it's not something that is dragging us down, not at all. The contrary, actually.

Okay. Very clear. And my final question is on your recent leasing of the Infinity building in Hagastaden. I know there's been some talk in the press of who the tenant may be, but could you provide some more details potentially on the yields, the rent levels and more generally, the discussions you've been having on letting. Are they with larger tenants and public companies? Or are they increasingly with smaller companies and potentially SMEs?

Actually, we cannot elaborate at all, regarding. We've sent out the information we can send out, and that's been requested from the tenant. But we will disclose more when they have either used or not used the option to reduce the number of square meters they will have. And then we will provide you with more information. But obviously, we're very happy that Ericsson has selected our building, Infinity. It will be a great building, and I think Ericsson will have a nice time sitting there in Hagastaden in our building.

Okay. Very clear. And just to follow up on the size of maybe the tenants that you're speaking to more generally in the market for lettings. Are they larger tenants and companies? Or do you think that the general size of this company is more skewed to SMEs?

Our portfolio is a broad pallet of very different type of buildings. We just don't have office. We have other type of buildings as well. So we have everything from very small tenants making components to whatever, industrial. And we have office, small offices and big offices. So we are speaking to a very broad palette of Swedish businesses.

Next question, [ Adrian ] from Deutsche Bank.

Basically, I had 2 questions. The first one is on the consent solicitation process for your bonds. As you mentioned, you got approval from majority of your bondholders. However, there is still one particular bond, the '29, which actually has even more constraining language compared to the other ones, which hasn't received consent. Hence, I was wondering what you intend to do with this particular bond because I guess the 2026 in any case is due in the very short term?

Yes. So what we mean when we say that we have better flexibility now is, of course, that we -- the volume outstanding that is having this language is much lower. Should we, in the future some time have transactions on the table, then we will manage that at that point in time.

Okay. So you may, at some point, revisit the content vis-a-vis this bond when you sell the assets?

Yes, exactly. I mean we will have a look at that, at that point in time.

Okay. And my second question is about the hybrid. I was wondering what and when you intend to do regarding the non-core '26?

I mean we are -- first of all, we are very happy with our hybrid. It's, as you know, running with 3.125% coupon, which is, of course, very good level. So we are happy about that. And I mean, we like the instrument. We like the levels we have today and do not want to speculate about future actions regarding the hybrid.

The next question, Pranava from Barclays.

I have a couple of follow-ups on what you just said regarding the consent solicitation. With the '26th and the '29th together, that's roughly 30% of all your bonds outstanding. So clearly, that is not giving you the amount of flexibility that you suggested. So if I could ask what was driving the timing of the consent solicitation that you did last year if you have not lined up any specific action immediately? And the second question is regarding your hybrid. The hybrid language, of course, doesn't have the same kind of constraints, but I was wondering if there's anything that would potentially require consent solicitation as well?

To the first question, back to the transaction margin and the transaction, it's also that transactions take time. So going into transactions, it's very helpful with better visibility of our situation. So that is probably the answer to the first question. And now we think that we have that flexibility. We -- I mean the results were pretty spot on what we were expecting. So we are happy about that. '26, I mean that's very close. It's coming up now in September, I think it is.

And regarding the hybrid?

Sorry, I didn't get the question?

And regarding the hybrids, is there any language in there that would accelerate or impede your future change in portfolio?

No language in the hybrid what I'm aware of, no.

So next question from John at Kempen.

Just on the net letting, are you seeing any differences between geographies and asset classes in terms of terminations as well as leasing?

I think in general, what one can say is that the market that has been struggling in the downturn that we have been experienced is, first of all, office and in major cities, in bigger cities. And then we have had a softer downturn in regional cities where it has perhaps not been a downturn. So offices in major cities like Stockholm and Gothenburg and Malmo and Copenhagen and Helsinki is struggling a bit more than we can see in regional cities.

And the positive turn in Q3 and Q4, is that skewed to any specific asset class or geography?

Could you repeat the question?

So that net letting turning positive in Q3 and Q4, is that driven by any specific region or specific asset class?

No.

Clear. And you mentioned that you're looking into improving the occupancy in more challenging markets. So what ways are you seeing in your first look into that? And is it -- can it be easily solved with, say, CapEx? Or does it even make sense to invest CapEx into these more structurally challenging buildings?

I think it's very difficult to answer generally what to do. It has to be case by case. In some cases, it makes sense to upgrade the unit and adapt it to the wishes of the tenant. In other cases, it might be giving a discount. In other cases, it's just answering faster than we've done historically. So it's very different and you have to look at on a case by case. But what we've said is that we have to be more flexible. We have to be faster and we have to really listen into what the clients are wishing for so that we can grab the clients that are out there before our competitors grab them.

And just maybe to ask it differently, do you see the CapEx spend in, say, '26, '27 to be higher than '24, '25?

Reluctant to speculate, but I would say it's probably will be around the same level as this year.

Next question, Paul May, Barclays.

I got 3 questions, 2 are linked, so I'll ask those together. You've obviously mentioned focused on leasing, leasing, leasing. I just wondered what your view is on sort of rental value per square meter, i.e., are you focused purely on reducing vacancy, in which case you'll allow rent concessions, lower rents to come through? Or are you focused on rent per square meter, in which case you'll happily have a higher vacancy holding out for that higher rent. So just to get a sense there.

And then linked to that, can you give us some color on where your current portfolio rental income sits versus market rent? If all your tenants left and you relet all of your assets today, would that be at a higher or lower rent than you've currently got in the portfolio, assuming that there were tenants available for that? And then I've got another question, but I'll ask in a second.

Very good questions. If I may answer the second one first, it's a difficult one, but I appreciate the question. And it would be -- it has to be booked a bit on the speculation side from my side. But I would say that we probably would reach roughly the same level as we have today. If every one of our tenants left, we would have some premises that would be rented on a high level, some on a lower level, but on average, roughly about where we are today. And the first one, could you repeat that one?

Yes. It's just looking and thinking how you think about leasing, which is the focus. Is it just reducing vacancy and therefore, you get rent concessions? Or is it we're focused on the rental level in which we live with higher vacancy?

It's completely dependent on actually the market and sort of the demand in the market. In some markets, you really have to give concessions, lower the rent to get a tenant in order to have cash flow and not having cash flow. But in other markets, it's better to wait because we know that there's demand there, and we write the lease contract over 5 or 7 years, and we don't want to lock in a too low rent level obviously.

So again, a boring answer, I understand that, but it's really on case by case, depending actually on the particular building we are looking at, not dependent on the particular market or asset class. It's really on case by case. And that's one of the things we've really been talking about here since back to basics that we really need to have smart thinking about every premises we have within the portfolio.

Yes. I mean similar to what we're seeing in other markets. As you say, it's very asset specific, not necessarily market or submarket specific. Just a final one. You mentioned Entra is not hurting, but just looking at their reporting, vacancy has been increasing and its earnings yield is much lower than your earnings yield. So you could argue that capital would be better spent selling Entra and basically buying back your shares. You announced obviously the share buyback today. I just wondered how you think about that and where the comment around Entra is not hurting us, it's benefiting us when actually if you look at the numbers, you could argue the opposite that it would be better to rotate that capital elsewhere?

I would agree to some extent to what you're saying that we could probably -- if we had the cash, use it wisely as well, not just having it in Entra. Entra is also in the market where demand has fallen a bit compared to as it was before, but not as much perhaps as in Stockholm or Copenhagen. So I was tilting more towards that when I said that Entra is not hurting us at least.

Okay. So the underlying market is a bit better positioned than some of your other markets?

I would say so, yes.

Next question, [ James ] from Green Street.

You mentioned some one-off costs associated with canceling projects. Would you possibly be able to let me know if the number of projects canceled was higher than usual, maybe what the nature of these projects was? How much CapEx was associated with this? And then maybe how or why you made the decision to cancel these projects?

I mean that was early stage ones. That is, of course, something that is -- we are always doing sort of going through actually every quarter. But then, of course, sometimes you put it more on a spot, not any specific areas or more business as usual, a little bit higher than usual.

Next question, Fredric Cyon, DNB.

I have 2 follow-ups on the transaction market comment you made earlier, Pal, where you alluded to a relatively strong market on the sort of back of cheap financing. So the first one is, are you able to call out any specific segments in your current portfolio, which might be up for sale and where you believe interest would be high in the market? And secondly, looking at the transaction market and the interest and your decision to do share buybacks today, do you believe it is possible to find sort of acquisitions of decent volume or size in the direct market, which are more attractive than your own share at this moment?

Thank you. I think the transaction market, as I said, it's driven now by a lot of funding being available to low spreads. So that's the main driver. But also, I think there's been a couple of years where companies has not done that many transactions, and that's also driven up demand a bit. They see potential now for restructuring their portfolios. If there are any specific parts of our portfolio, which has extra interest from potential buyers, I can -- no, I can't really say that at this stage, actually. No, we have lots of discussions with people, and it's a broad palette of different types of discussions, I would say. And I have to ask you to repeat the other questions.

Yes, sure. So the second one is on the back of your decision to do share buybacks and the current discount to NAV and the transaction market today, do you believe it is possible to find acquisitions in the direct market, which is -- which are more attractive than your own share?

Possible, but difficult.

Thank you, Fredric, and that was actually the last question for today. So thank you all for listening, and have a great day.

Good morning, and welcome to this Castellum webcast and Q&A session. From our side, it's myself, Christoffer Stromback, acting CFO; and Pal Ahlsen, CEO. The topic for today is our new strategy that we announced 2 days ago. And we will start with a short introduction, and then we will open up for the Q&A. [Operator Instructions].

Over to you, Pal.

Good morning. As Christoffer said, the short introduction to the new strategy, which we have called Back to Basics, and then we'll open up for questions.

Back to Basics, I would say, refers to going back to the core of how to manage real estate. And as most of you know, we are a commercial real estate company, and we are predominantly owning properties in Sweden. Roughly 92% of our assets are located in Sweden. And it's in Sweden, we have our sort of the DNA arises from owning commercial real estate in Sweden.

I think that will remain that way going forward. This does not exclude that we could both increase and decrease in other geographics that we already have, Finland and Denmark and through Entra in Norway. But in the foreseeable future, one should probably think that we will continue to be predominantly in Sweden, owning commercial real estate.

What's really new and what I think will be the biggest transformation within Castellum is this crystal clear focus on profitability. Previous strategies, probably from the beginning of the Castellum history, focus was more on growth rather than profitability, and this is something we would like to switch, taking away all actions that are not meeting our return target on 10% return on equity.

And another key thing we think is important for reaching our return target in the long run is increasing transaction pace. We think that we need to rotate the portfolio a bit at a higher pace than we've done historically. Buying properties, we believe will meet our return targets and handing over properties that where we are not the best owner going forward to others, which have other return targets, other expectations for the future or other views on risk. So increasing transaction pace will be an integrated part of our new strategy going Back to Basics.

The centralized property and asset management, that's something which were really from the beginning of Castellum's history, then everything was basically decentralized. And in the regions of the company -- and since then, a bit more has been focused on headquarters, but we are turning that back a bit, putting more responsibility and accountability in the regions. We believe that's where the business is done when you own commercial real estate.

And something which most companies really say that they are doing, continuously strive for improvements. This is something we also will do, but we will also take actions to actually do that. And one of those actions is that we will increase our efforts in education by Castellum Business School, and that's something that will be rolled out during next year.

And before I hand over to Christoffer, the final point I would like to mention is an increased level of cost awareness. Most companies are obviously aware of costs, but we would like to increase that. And I've mentioned the usage of consultants, for example, and other issues or other topics where we actually can reduce costs. And one of the things we've announced and are in the midst of effectuating is reducing staff on headquarters.

I'll hand over to you, Christoffer, and he will talk a bit more about the passive side of the balance sheet.

Yes. Thank you. So we have also decided to introduce a more strict capital allocation focus with sort of our shareholder value as top priority. And as part of that, all investments should meet our return target of ROE of above 10%. And all investments should also be evaluated against each other and against other investment opportunities, and that include investing in ourselves through share buybacks.

Excess capital, if and when we have such, shall be distributed to the shareholders, and that will be done in the most value-enhancing way possible. And all of that also comes to that we have changed our dividend policy. We now call it a capital distribution policy. So instead of the dividend of at least 25% of the income from property management, the new policy states that it's still the 25%, but it will be distributed to shareholders either as dividend or through share buybacks. We do not have a specific sort of formula for when it will be dividend and when it will be share buybacks. So that is something the Board will decide from time to time and when relevant, of course, propose to the AGM for a decision.

When it comes to financial targets, we keep all of them. So still, as we have already said a few times, the overall financial target for us is a return on equity of at least 10% over a business cycle. So that is the overall target, same as we have had for the last year or so. We also keep our financial targets or risk limitations with an LTV of below 40% and ICR above 3x. So those ones are also kept. One change we are doing is that we are adding our ambition to maintain an investment-grade rating at all times to our financial policy. So the ambition itself is not new, but that we are adding it to the financial policy is new.

Yesterday, we also announced a process for amending the terms for our EMTN bonds. And more specifically, it's the so-called cessation of business provision that we would like to change. And the reason is that we think it would better allow us to execute on this new strategy when it comes to asset rotation. So we are offering the bondholders a fee to vote in favor of the amendment. And in addition, we are adding a step-up to the coupon of the bonds, should a divestment lead to a downgrade to sub-investment grade.

And with that, it's time for a question. [Operator Instructions]. And the first question comes from Lars Norrby, SEB.

Lars Norrby from SEB. The composition of the property portfolio, I guess, in any company is maybe the most important component regarding future development of the business. Now you're using the expression focus on commercial properties predominantly in Sweden. That would, I guess, theoretically give room for you to have a higher share of your business outside of Sweden. But aren't you primarily looking at it to change it in the other direction? And specifically, what is your view on your portfolios in Finland and Denmark in terms of -- are they subscale? Are they big enough to generate efficiency in property management?

Thank you, Lars. I think the -- when we say commercial real estate predominantly or commercial properties predominantly in Sweden, we are referring to a couple of things actually. One thing is that Castellum owns a pretty broad palette of different asset types within the commercial real estate. We own office, obviously, some public properties. We own light industry, warehouse, logistics, but also some hotel and also some retail. And we are pretty good on managing all those type of assets or types of properties.

But the overall key here is the return rate on equity. And there will be differences over time, what type of composition we have in our portfolio, depending on the -- what we believe about future profit potential in different asset classes. And that overall view on that is the expected return going forward will sort of dictate our -- where we are, how much is allocated, so to say, to Denmark or Finland or to Vaggeryd or to Stockholm. We have not set up any target that we should be only in Sweden within 5 years. I could foresee that we actually grow in Denmark if we see profit potential there. Or if we don't, we have to reduce, obviously, if there are better opportunities in other areas within our portfolio.

Okay. Just one more follow-up question. You also have an indirect holding of properties, one could say, through Entra. You've been buying shares during the spring, and then that's been put on hold, if I use that expression, for quite a while. What's your view on Entra going forward? My impression is that the other major shareholder, Balder, may very well be open to selling the stake if the price is right.

No. I think Entra is a great company, and we hope that company will continue to develop. And as soon as we know anything of our future plans, other than holding what we have right now, we will obviously tell you about those plans.

So next question from Fredrik Stensved, ABG.

Can you hear me fine?

Yes.

Perfect. So first question is on almost the same theme as Lars' question. I mean I read your bond document press release yesterday, and I assume that you don't sort of propose a cost increase of 25 basis points unless you actually have a thinking that you might divest Denmark and/or Finland in sort of the near future. So can you add any color or elaborate on your thinking? Are there already ongoing dialogues, which market outside of Sweden do you think is the most likely to be divested and so on?

I should not interpret it like that. As we deem the cessation of business clause in our bond agreement is that we are not allowed basically to do anything at all with the property portfolio. It's put strains on us what we can do. So this has nothing to do with either Finland or Denmark. This is -- we would like to have a bit more freedom to rotate the assets within our portfolio.

Okay. Yes. I think the way I read it was predominantly in Sweden and this together sort of adds up to that conclusion. But I hear your point. Second question on your capital distribution policy change. That's still sort of a portion of income from property management. How do you currently think about share buybacks and/or dividends versus other sort of capital allocation options in the case of divestments and your balance sheet being below 40% LTV and above 3x in terms of ICR?

Well, in terms of divestments, it's sort of definitely an option to go down the route of share buybacks, definitely. Probably there are room in the current shape of the balance sheet as well. But as you know, no such decision has been made. But I mean, we have a strong financial position and definitely room for both dividends and share buybacks should we decide to go that way.

Would you be open to selling assets for the sake of buying back shares?

I think no. If we decide to sell assets, it's due to the fact that we see better opportunities elsewhere, not for the purpose of just buying back shares.

Next question from Nadir, UBS.

Can you hear me clearly?

Yes.

My question is -- well, I have a few questions, but I'll ask them one by one, if that is okay. The first one, you mentioned maintaining the investment-grade rating. Is there a bit of pressure from the rating agencies? Or are you comfortable where you are now and therefore, there isn't any need to dispose or restructure the capital? So in other words, what you're doing now, is that because you have been in discussions with the rating agencies and there is a risk of a downgrade at the present?

No, this is purely from sort of ourselves also in connection with that we're adding that language in the proposed new bond terms than we thought it would makes sense to also sort of add it to the financial policy. I mean, as I said, the ambition has been there for quite some time. So it's more sort of highlighting that ambition.

Okay. That's very clear. Staying on the topic of debt, my second question is, how do you define the 40% LTV? Does that include hybrids as per the EPRA definition? Or are you using your own company-defined LTV there? So how do we calculate that in your case?

That's including the hybrid as we are having the definition in our reports, i.e., the hybrid is recorded as equity, as you know.

Okay. So we're using your company to find its LTV?

Our definition of LTV.

Okay. Okay. That's very clear. My third question is, your ROE on a net income basis versus the book value of equity was around, I believe, 3% to 4% for full year '24. And we, of course, don't have the figure yet for full year '25. But how do you go about reaching your 10%? Is that going to be via net income growth? Or will it be more through shrinking the equity book value on the balance sheet?

Predominantly, it will be driven by returns from our assets, and that comes in both form of yield from the properties or income return. And then if we manage to increase income, obviously, there will be some growth in values. So it's a mix of those 2. And I think the increasing of asset rotation or transaction pace will also help us in always having the right properties with the best return probabilities in the portfolio. So it's not the case of increasing debt to increase return on equity.

Okay. That's very clear. And the timing on when you reach this return on equity of 10% from your current standing and also when you plan to reach the 40% LTV threshold and the ICR limits you have, like what time line do you have for reaching those metrics for the purpose of our forecasts?

Our return target must be seen over a business cycle, obviously, since return on equity is influenced by the volatility of asset prices or property prices. But over a business cycle, if that may be 7 or 10 years, we would like to see an average of 10% return on equity. The past couple of years has obviously been quite challenging on that note, with increasing interest rates and decreasing property prices. In that environment, it will be impossible, obviously, to meet return on equity 10%. But we are looking on this over a business cycle. So it's a long-term target. And I think when it comes to commercial real estate or real estate overall, that you have to have a long-term perspective to reach good returns.

And that's very clear. And on the LTV and ICR, do you have like a time line for how you want to go out reaching this and by when you expect to?

Well, those 2, we are already reaching. So we are within those targets as of today. And those are more risk limitations, and we should keep being within those limitations.

Okay. That's very clear. And my final question is, as of today, given the discount you're trading at and the current transaction markets and the capital opportunities you have, like if you were to decide today as a Board, what your capital allocation would be, would you prefer share buybacks or dividends?

That's a good question. Probably we should come back to that after sort of -- as it is a Board decision, no such decision has been made, obviously, as we haven't announced it, then it would probably not be the right way for us to comment on.

Next question is from Jonathan at Goldman Sachs.

I have 2, if I may. The first one, you're talking about potential cost reduction. Are you able to give us any quantification of that, that would be super helpful, please. And just also to come back to your asset rotation policy, so you want to accelerate that. Should we then understand that you're looking, given your ROE targets, to sell lower-yielding properties or higher-yielding properties or noncore properties? Or like, it's a bit unclear how you want to look at the properties that you want to dispose. Any specific you've talked about hotels or retail or any specific more subsectors? Like how are you going to look at that rotation, please?

I think actually, in our portfolio today, even though the weights on some of the asset classes are quite low, but we have, as I said, a broad palette of different type of properties. And so that will probably change over time, but we have no targets for how big a proportion we should have of logistics or light industry or office. That will be more driven by the rates of return we believe we could have in those different types of properties.

When it comes to your question regarding high-yielding, low yielding, we are looking on this on more of a total return thinking. This means that we could very well have low-yielding properties in our portfolio if we feel that the growth potentials in those type of assets are good. But it can also mean that we have high-yielding properties as well. We are not excluding anything here. We are looking on the long term to meet our return target of 10% on equity over the business cycle.

Okay. And it's my understanding, I think that your documentation on the bonds like would allow you some flexibility. So does that mean that you're looking to move quite big, like some seem to see some sort of case law about 15% threshold. So other than -- below that, you wouldn't need that consent. So was that a limitation to you, that 15% factor? And sorry, there's a cost question as well.

I can answer the cost question, and then I'll hand over to Christoffer. What we've said is that the reduction in the head office will save us probably around SEK 50 million next year. But as we also mentioned in the Back to Basics, new strategy of Castellum is continuous improvements, and that would lead to continuous cost reduction as compared to not doing that. And I also think that we could be slightly more cost aware within the company, and that will also continuously lead to lower costs compared to -- as if we wouldn't have had that focus. But SEK 50 million for next year is what we've communicated regarding staff reduction on the headquarters for next year.

And then from the flexibility side, I mean, of course, there are rooms for some asset rotation within the current terms, of course. However, we think that more specifically, the material subsidiary definition that puts some constraints that -- I mean, it's not that big figures in some of those subsidiaries. So there, we would like to amend -- therefore, we would like to amend those.

Okay. Understood. And in terms of your corporate structure then, do you have many subsidiaries?

We have something like 8 to 10, I think. I can check it up later, but something like that. Next question comes from [ Florent ] from Citi.

I have 2. The first one is, do you have a plan B if you don't get the consent as expected? And the second one is regarding hybrids. In your new financial policy, you don't make any reference to that. How do you look at hybrids in general? And how should we think about the call in a year's time?

So if -- I think I got the first question and then sort of the answer to that one. I mean now we have this process in the market and we would like -- we don't want to speculate in the outcome of that, of course. So we'll wait for that. We think that's the most prudent way to do it and sort of not speculating about the outcome.

And then -- what was the second question?

And hybrid.

The hybrid. No news about the hybrid. As I mentioned before, it's recorded as equity. So no difference made to our financial targets, no difference how we are seeing on the hybrid and sort of no new message on that as well. So as with most things, we have to come back to that when we have something to say about it, so to say.

Then next question from Neeraj at the Barclays.

Actually, my two questions were just being asked, but I would still go ahead and ask in a slightly different format. I mean it's fine you don't want to speculate about the outcome of the consent solicitation process. But when you briefly spoke about it, you said the current documents are kind of restrictive. So adding this 200 basis points of step-up in the event of higher downgrade, do you think it makes it restrictive for future actions of the company?

Can I take that once more?

Sorry. I was just asking, do you think the bond documents become restrictive again for any future events company may want to do?

No, no. Okay. That one we -- no.

Okay. Good. And coming to hybrids, again, like do you want to increase or decrease the size of your hybrid in the cap stack? Do you see it as like an expensive debt instrument as you think about the cost savings and all those things? Any more thoughts about this, if you can provide color?

At this point in time, we actually don't have any more -- maybe we have thoughts about it, but we think it's more prudent to come back to that one when it's time for that and communicate properly sort of more formal communication to the market at the right point in time, so to say.

So next is Michael from BNP.

I have 3 questions. If you don't get the consent to amend the EOD clause, say, for like the 29th or the others, would you still look to go ahead with the restructuring of the companies -- of the company? And then if the 29th didn't give you consent, would you -- would it still make sense to give the early consent fee to the other bond maturities?

And then last, my third question is, if you do the split, sell some assets, you are going to have a smaller company. We know the agencies tend to look unfavorably on scale. Would you -- if the agencies did that, would you look to have a tighter financial policy? Or would you say, I accept that we are going to have the same -- we're going to have a similar leverage, but just be one notch lower, and we're not going to try and keep the mid-BBB rating?

Plenty of questions. I mean I think we have to answer the same answer as before that we do not like to speculate on the outcome of the process that we are in the middle of right now. So we are in the market with that one, and we -- I think we'll leave it as...

Okay. Maybe I can rephrase that then. Because in the document, you talk a lot about interconditionality. Maybe can you give some thoughts on why you guys wanted to include that language in the document? And I would imagine that most of this is for the 29th. Is it linked -- is that language there linked to basically the -- for those 29th? Maybe anything you can share to give more color on that?

We think it's good to have that flexibility in this ongoing process, given that, of course, we don't know the outcome. So for us, it's natural to have that flexibility. And as I said, we don't want to speculate about the outcome.

I mean I appreciate that it's hard to comment on a like-for-like thing, but thank you for that. And anything on the S&P -- sorry, the Moody's, if you had a smaller company, would you look -- and they look down favorably, would you want to tighten your financial policy to shore up your BBB rating? Or it's more about protecting your financial policy regardless of how the agencies view on scale?

I think also that one is it's sort of too many steps ahead. So let's see what actions are taken from our side, what transactions we are able to do and I mean, how we are looking at that in time. So at this point, we are adding the language that we have done, communicating that we are having a strong ambition to maintain our investment-grade rating, and that is what we have communicated 2 days ago, and that's where we stay at for a moment.

Thank you. Next one is Viktor at Pareto.

Just one question left from my side. You mentioned increasing the M&A pace, but how do you view speculative projects like Sunnanå, Malmö or Infinite in Stockholm in order to help you achieve your return on equity target over the next 2 years?

Our view on the projects is that they should have the same or even higher return rate -- expected return rate than existing portfolios since at least, what you said, speculative projects, commonly have slightly higher risk.

Yes. How do you, like, starting those? Are you looking to actually start...

If we believe -- and that's obviously case by case, what we believe, in that particular market and that particular type of assets that are under discussion, what -- we believe that the expected rates of return will be -- if I should speculate, I think that we might have slightly less speculative projects going forward. But that's difficult to say since we don't have anything -- since -- before we have actually made any decision upon that, we are looking on many things we could do, divestments, acquisitions and upgrades of our portfolio and everything should meet 10% return on equity. But on projects, you should probably expect a bit more since they are a bit more risky than what's already up and running.

Thank you, Victor. Next one is Stéphanie at Jefferies.

Well, I appreciate it's a bit tricky for you to answer our questions as you are in the middle of the process of reviewing the activities and so on. But maybe a follow-up on the close of solicitation to bondholders, to modify "the cessation of business provision." Earlier this year, your main shareholders have been suggesting in press articles about splitting the company in several companies. So could you give us your view on this option? And maybe as you quoted also or you mentioned commercial properties to be the focus. I was wondering if there is -- if there are noncommercial properties you are considering to divest? What would be the noncommercial properties in your portfolio in your view? And yes, that's pretty it.

I mean -- when we refer to commercial real estate, it's basically most of real estate besides residential real estate. So we are not thinking about entering into the housing market, so to say.

In the current portfolio, it's more or less only commercial properties. I think it's SEK 49 million rental income from resi, but those -- most of that is included in sort of 1 or 2 floors on a commercial building with apartments. And in the report, it's 0%, SEK 49 million out of roughly SEK 10 billion total rental income.

Sorry, but -- so you are not considering public properties as noncommercial. That's what I wanted to know.

No. Our public properties is, in our definition, commercial properties. So you should not read it as anything large in our portfolio that sort of does not fit into our strategy anymore. Rather the opposite, almost 100% of the portfolio is commercial properties.

And then on your question on splitting the company into pieces, so to say, that's not at all on the table right now.

Thank you. And that was actually the last question for today. So thank you all for participating and asking questions. And also, of course, thank you all of those who are listening today. Bye-bye.

Bye-bye.

Good morning, everyone, and welcome to this presentation of Castellum's Q3 report. My name is Christoffer Stromback and I'm Head of Investor Relations. There will be a Q&A session in the end of the webcast. [Operator Instructions]. Let's start. Please go ahead, Pal Ahlsen.

Good morning. The mission from the owners and from the Board to all at Castellum is crystal clear. Castellum needs to become more profitable. I think that's an exciting and fun assignment, fun mission, but I don't think it will be a walk in the park. I think everyone knows that the heydays of real estate is over for this time. So now it's back to basics for Castellum in the day-to-day business. So instead of yield compression, it's leasing. Instead of interest rates, which are -- which were almost 0 it's turning over every stone to find ways to become more efficient and more cost efficient. But it's also in the day-to-day business making sure that we are owning the right properties in the right locations and consequently seizing the opportunities we see in the transaction market. It means that we will become a more entrepreneurial company, I would say, a less democratic company.

Although the net leasing in the first quarter -- the third quarter, this quarter, was positive with SEK 16 million. We know that the net leasing for the previous quarters have been negative. So in terms of vacancy rate, we know that our performance will become slightly worse going forward than it is right now due to this negative net leasing in previous quarters.

So in the property management for us right now, it's mainly 1 focus, and that's leasing, leasing and leasing, means that we have to become more flexible and faster in our leasing activities.

At this stage, I've been CEO now for almost 2 months. I've seen almost all properties, not all our properties yet. And just a personal reflection, I think what I've seen so far of the property portfolio is actually a bit better than I had expected. Of course, that statement has to do with what I thought before I started. But at least, this is slightly better than I thought, and I'm very happy about that.

The locations are good and suits the type of purposes the buildings have. We have nice locations for office in inner cities, but also nice locations, but in B locations in the office segment. And then we have lots of industry and warehouse and logistics, also in the right locations given the purpose of those buildings. And I also think that the property portfolio is a bit more well kept than I had thought before. So that's a nice starting point, I think, for my new assignment here in Castellum.

And the other reflection I would like to do is, I met most, but not all, of the staff, and I'm meeting quite competent staff that know their property portfolio by March. So I think we have a nice starting point for not turning the ship around, but really to get to where the owners and the Board want us to more profitability.

As I suppose most of you know, we are commercial real estate company with most of our holdings in southern part of Sweden, but we also have properties in Copenhagen and in Finland and mainly in Helsinki. Most of our assets are office properties. We have lots of public tenants, governmental tenants and then we have a large proportion also of office -- of warehouse and light industry. And most of you also know that we have a significant share of the bid in Norway called Entra, which owns mostly AAA located office buildings in Oslo, and we own almost 40% of that company. So all in all, we have almost, and including Entra, we have almost properties for SEK 160 billion and directly own SEK 137 billion.

Thank you, Pal. I'm jumping into the summary of the results. The results compared with the same period last year is negatively affected by divestments and higher vacancies. In addition, income from property management is impaired by higher financial costs due to one-off profit from our bond repurchase last year. Net leasing in the third quarter is positive SEK 16 million and minus SEK 166 million for the period, still happy to report 2 consecutive quarters with positive net leasing. Occupancy rate stands at 90%, which is somewhat lower than last quarter. Net investments of SEK 3.5 billion compared with minus SEK 327 million in the same period last year.

Going into details, looking at development of income during the period, the like-for-like portfolio income is unchanged. Indexation contributes, but is offset by higher vacancies. The vacancies is coming quarters will continue to increase due to our weak net leasing in the first quarter. The direct property costs for the like-for-like portfolio is increased by SEK 40 million, equivalent to 2.5%. Direct property cost decrease at the beginning of the year due to the warm winter, low increase in the second and third quarter, primarily due to the higher rental losses, which increased by SEK 25 million.

Divestments decreased income with SEK 125 million, however, partially mitigated by acquisitions in the second quarter, contributing to the income with SEK 29 million. Central administrative and property administrative cost is in line with previous years. On an aggregate debt level, NOI decreased by SEK 226 million with divestments, increasing vacancies and one of insurance claims recorded during second quarter previous year as key drivers.

Looking at renegotiations. Corresponding to an annual rent of SEK 197 million, which translates to 9% of total lease stock up for negotiation were conducted during the period with an average positive change in rent of 1.6%. Limited investments on average to secure the renegotiated leases. Additionally, contracts with an annual rent of SEK 1.345 billion were extended during the period with no change in terms, equivalent to 60% of total lease stock up for negotiation, which is up from 50% in the second quarter, indicating that a good portion of our tenants are comfortable continuing paying their current rent of the indexation.

Net leasing for the quarter amounts to SEK 16 million for the period, the net leasing amounts to SEK 166 million minus. The economic occupancy rate amounts to 90%, a decline of 1.2% since third quarter '24. The decline is driven by increasing vacancies corresponding to 0.8% and a general review of vacancy rents, which explains additional 0.4%.

Looking at property values. During the period, Castellum has written down property values with approximately SEK 1.4 billion, equivalent to 1%. The value change is partly driven by the default of Norrköping, the fact that offer will leave approximately 24,000 square meters in Solna and generally lower cash flow expectations in our valuations due to a downward pressure on rental levels and/or increasing tenant investments to uphold lease levels in some of our markets. The valuation yield is in all essence, the same as the second quarter 2025 at 5.63%. In addition, our projects continue to show positive value add.

Looking into the transaction market in Sweden, the investment volume in the Swedish real estate sector ended up at approximately SEK 104 billion in the period, compared with SEK 82 billion in 2024 and SEK 83 billion in '23. Our investment volume -- of the investment volume approximately 20% was office properties, which is higher than '24 and '23, indicating growing interest into the office segment however, on aggregate, a bit lower than historical average.

Looking at financial highlights, market conditions are very favorable credit margins at historically low levels and with attractive term premium, current credit spreads in the domestic market for a 3-year bond is at around 90 bps and for a 5-year bond around 120 to 125 bps. European market is at the lower end of this range. Nordic banks continue to offer competitive pricing and are willing to increase volumes. S&P confirmed our BBB rating with stable outlook during the quarter, also hold a Ba2 rating with stable outlook for Moody's.

Low refinancing activity during the quarter. In total, we refinanced SEK 1 billion in secured debt on a 10-year tenor, no activity in the bond market and limited bond maturities in the coming 6 months. Average interest rate currently at 3.1%, down from 3.2% during the second quarter. We see a potential to further reduce the average interest rate in our debt portfolio by refinancing loans and bonds on better terms.

Looking at financial key ratios, very small changes in financial key ratios compared to the previous quarter. Loan-to-value now at 36.5%, an ICR currently at 3.2x, comfortable headroom against policy levels and covenants. Average debt maturity in average fixed interest term stable at 4.6 and 3.6 years, respectively. We would like to highlight that our interest rates hedging exclusively comprises plain vanilla interest rate swaps. Interest-bearing liabilities amounts to SEK 57.5 billion, down by SEK 1 billion since the beginning of the year. Over to you, Pal.

Thank you, Jens. As most of you know, we have a very sustainable portfolio and a high focus on sustainability. And here, I would like to highlight the energy efficiency, which has improved by 7%. And that's what I meant previously that we have a very good staffing in the company because it's not easy to reduce the energy consumption with 7% which is needed since the costs of energy are normally increasing quite heavily from the municipalities as we buy lot of energy from them. So this is a very good performance, I would say, reducing energy efficiency. We're improving in energy efficiency.

We have made some acquisitions this year. We bought a couple of properties from Corem during the summer, also sold some properties, mostly single assets and we made the investments. And I think going forward, we will have -- as I foresee it at least, we will have more transactions going on in Castellum, even if the net investments may remain the same, we will have higher figures, both on the acquisition and property sales side of things because that, I think, is one driver of profitability for a company -- for a property company in owning exactly the right properties at the right moment in time.

And I think that sums up our presentation, and we are happy to answer questions.

[Operator Instructions]. And the first question comes Fredrik Stensved of ABG.

Firstly, Pal, when you took the CEO position in almost 2 months ago in the end of August, I believe you stated that the management and the Board of Directors would sort of formulate a strategic update or a strategic review. Would you say that the communication today where it's back to basics, it's focused on leasing, leasing, leasing, et cetera. Is that the strategic review all said and done? Or should we expect anything more in sort of a formal strategy update going forward?

I think that's what I've said regarding back to basics is certainly part of the day-to-day business of commercial real estate company. But we are still working and thinking a bit about how to exactly formulate the strategy. So we will come back to that in a more formal way than this.

Okay. Perfect. Sorry. And then on -- I think -- it's mentioned in the CEO letter that maybe Castellum will be more about entrepreneurship, decreased bureaucracy and selling and buying when good opportunities arise and so on. Is it possible to make any more concrete comments about what this means, which type of properties are you looking to sell and buy, et cetera?

No, not at this stage. I would say. What I can say, though, is that I'm also surprised by this of our colleagues in the industry has reached out to see if there are any swaps we could make the properties or that they are interested in buying certain parts of our portfolio or in general, making transactions. So there's definitely opportunities in the market.

Okay. Final question from me, for what's your view on share buybacks, given where your share is trading an implied deal as you see it in the direct transaction market versus buying shares?

Personally, I'm all in favor of that. We're not there yet in our discussions internally, but I'm in favor of buying back shares, at least when we have such a huge discount as we have today.

Thank you. Next one is John Vuong, Kempen.

In the media, there were talks about you considering splitting up the company or at least the shareholder is talking about that. What are your thoughts on that now?

It's too early to answer that specifically, but that's obviously, something many people are speaking about, the possibilities of splitting Castellum into smaller parts, and that would sort of show value in -- on the stock market. But that's obviously 1 option that we have, but we are looking on continuously all options we have for driving profitability. So I can't really say more than that at this stage.

Okay. And then when you're talking about owning the right proposition in the right locations, how do you see the current pace of noncore asset sales? And is there a change in what you designate as noncore? Also following up on that how do you assets outside of Sweden as well?

Yes. What I mean with owning the right properties in the right locations is owning those properties that will contribute to our mission to over the business cycle giving a return on equity on 10%. That's exactly what I mean with that. That doesn't mean that we should have specific locations, only AAA locations in downtown cities or that we should only have office buildings. I think we will have a mix of different type of properties that we believe that in the long term will support us in our mission to get 10% return on equity.

Okay. That's clear. And you were talking about asset swaps, that's colleagues of your view in the industry are considering asset swaps with you. What's your view on nonyielding assets in your portfolio like the Säve Airport. Could you consider swapping down into, say, a higher-yielding assets?

This was more a comment that there are transactions being made in the market and that is big interest for our portfolio in the market. All our business -- all our activities here at Castellum are aiming to reach our target of 10% return on equity. If a swap with some other owners is supporting that, we are -- we'd obviously look into that and acquisitions as well and disposals as well.

Next one is Lars Norrby, SEB.

Just follow up on the strategy and the portfolio composition in particular. When you're looking at it, are you particularly thinking about parts that are subscale in terms of achieving efficiency, are those most likely to be on the divestment list?

I mean, efficiency that ends up in the cash flow from the property, right? But when we are looking at this, we are not looking at efficiency in that manner. A property can be very inefficient in some sense but very profitable. So we are not saying that just because this property is a bit messy to deal with or expensive in some sense, that's reflected in the cost of the property, right? So looking at this from a strict expected return on equity perspective.

So in that sense, just still thinking about, let's say, the portfolios in Finland and in Denmark, are they big enough or are they efficient enough to warrant the position within Castellum?

I can answer generally on that question. I think more important than size and more important than efficiency in some sense is the markets as such. Other markets that will support rental growth are the markets where vacancy in 10 years from now or 5 years from now, will be lower or higher than today. Those questions are significantly more important than if we can reduce the cost of property management by [ SEK 10 or SEK 15 ] per square meter per year. The rental growth and the demand are significantly more important. And I think that's something that shows up very well when you do a portfolio analysis like this. That it's the long-term vacancy and the long-term growth possibilities in rents that are the most important factors when owning real estate. So when -- and obviously, the price of the properties. That's the starting point, obviously.

Okay. Final question from my side, while I brought up Finland, brought up Denmark, let's talk about Norway just briefly. I'm thinking about Entra, you're holding in Entra some 37%. And at the same time, Balder is close to 40%. Are you -- I mean, my impression is that Balder may be interested in looking for some kind of solution to that ownership situation, what's your view on Entra going forward?

I think what I can say regarding Entra, I think they are facing somewhat of the same challenges that we are facing in Castellum. And they also have a financial target of trying to reach 10% return on equity over the business cycle. And to reach that in an environment where needs are not compressing, you need to have significantly better growth in the net operating income to as low investments as possible.

So they are facing, I would say, the same challenges as us, how can we be growing net operating income on a like-for-like basis with as low investments as possible to come close to the target. So they are facing the same challenges as we do.

Regarding our position there, we haven't discussed that much and I have no further to say rather than that we, as owners really want to see profit, obviously, in the company to increase. And the only way forward is increasing net operating income by working by leasing, optimizing costs and not just -- and minimizing CapEx -- making smarter CapEx...

Next one is Nadir Rahman from UBS.

It's good to hear from you, Pal, on your first conference call. Looking at the like-for-like rental growth, I know that was, I think, around minus 0.3% on a total basis and minus 3.4% on a net basis. So could you give a bit more color on the contribution from indexation versus vacancy given that the vacancy did reduce slightly -- sorry, the vacancy increased slightly during the quarter. That's my first question.

I think the -- we managed to increase sort of the rental levels in the portfolio. But the vacancy increase is sort of wiping that away. And I think the rental levels have increased somewhat around 2% in the portfolio. But the vacancy effect is bigger plus that we have a bit more rent losses than we've had in previous periods, and that explains the sort of flat like-for-like growth in rental income.

And your indexation, what kind of percentage were you seeing during the quarter?

During the quarter, we get it once every year. And what we see right now is if the CPI, if we get 0.8%, we believe that from the first quarter, we will achieve slightly below 1%. So we have fixed step-ups in some of our contracts. And of course, some of our public sector tenants have below 100% CPI indexation. But on average, when CPI is low, we usually get a bit higher.

Okay. That's very clear. And my second question is on the net lettings. So like you mentioned, it's been positive in Q3 and I know that for the year-to-date, it's been negative overall. But how do you see this trending in Q4? And I know that Q4 generally is a more active quarter for lettings and general transaction activity in the Nordics and in Sweden in particular.

I'm reluctant to speculate. But what I can say is that this is our main focus. It's leasing, leasing, leasing to get to turn this around, so to say. We don't want to present flat like-for-like growth rate. We don't want to present an increasing vacancy. So this is our focus. It's leasing, leasing, leasing to turn that ship around, so to say.

And in order to achieve all the leasing that you need to maintain vacancy and prevent that from rising any further. Do you feel like your -- wouldn't you change for rental strategy and perhaps offer more rent freeze or incentives to tenants? Or do you think you need to compromise on rents in order to achieve a higher level of...

I think we need to use all the tools in the toolbox being faster and more flexible. It's very dependent on the specific squaring about, but we really need to use all tools in the toolbox in a market where -- in some markets, there's a slight oversupply of offices, for example. There, you have to be faster and smarter and more flexible than your competitors. And at least in the long term, having the right locations where there actually is a long-term demand for the square meters. But using all the tools in the toolbox being faster, more flexible than our competitors, then we can turn this around.

Okay. That's very clear. And final question from me direct to Pal. You mentioned earlier on the call that the situation at Castellum and the portfolio and so on, where "better than you expected when you came in." What was the expectation before you joined Castellum?

Well, that's a good question. But as I said, I think what I've seen so far, I think the locations are slightly better than I thought they were. And I think that the upkeep of the buildings are slightly better than I thought. And as I said, it's difficult to -- it's just my feelings around this, it's difficult to put words on it. But it is a bit like 100 meters sprinter with the targets running below 10 seconds on 100 meters. I thought we were started at 103 meters with the goal of running below 10 seconds, but it's actually starting from 100 meters. So to give some color on that. So slightly easier than I thought, given a slightly better portfolio and a very dedicated staff in the company.

Next is Stefan Andersson, Danske Bank.

Three quick ones from me. First one on reducing costs. You're talking about that, and we see that in your -- in the report as well. You mentioned that -- just trying to understand the magnitude of this. I mean it's one thing to cut newspapers and be prudent of whatever you do. But is there any -- do you see any bigger opportunities here? I mean is there still synergies from Kungsleden merger to take out? Or is it -- I mean I'm just trying to understand if we're talking about small, small things here and there or if there's any bigger ones.

I'm sorry I have to ask this, but could you repeat the question and speak a bit louder? Because I didn't hear the full question.

Okay. Sorry. I hope this is better. So my question is really on reducing costs. You talk a little bit about that. But just to understand the magnitude, is there any bigger things that could be done with efficiency, heritage from Kungsleden merger, I don't know. But was it just smaller items here and there and [Foreign Language], as we say in Swedish, daily?

Okay. I got the question now. Your question in regards if I could give any estimate how much costs we could cut when we are turning over every stone. I cannot give a forecast cost about that. But what I can say is that we are really turning on over every stone. And that's why I mentioned the newspaper subscriptions. I think I mentioned that in the CEO letter, and when you're turning over every stone, you will find things like that.

And just to be specific when it comes to newspaper subscriptions, I think we can save SEK 0.5 million there. And that's perhaps not money. But a large, many stones being turned over, I think we can save a lot of money, but I cannot give an estimate on that at this stage.

Okay. Good. And then on -- we talked a little bit about the renegotiated rents that I imagine there is some investment in CapEx associated to that. Could you maybe give us a flavor of what kind of direction you have on the spot market? I mean, is that -- do you actually see rents coming up? Or is it actually going down?

I mean looking at the renegotiations, I must admit that I was actually surprised myself when we dug into it and we do not invest that much money into the renegotiated deals, and we do not see any clear sign that it's increasing or decreasing.

Okay. And then the final 1 is Säve, which -- I mean it's -- I thought -- I've seen it as a very attractive asset that you have within a very nice segment and all. I understand that you've had some planning issues there with other potential use of the airport and all that. Maybe could you maybe elaborate on your hopes for that now with the new situation if you could get compensation somehow? Or if you could alter the use in some way, whatever you might have on that?

I cannot give so much details, but it's, in my mind, a very valuable asset going forward, especially given the huge investments that will be done in the defense industry. So I think that's an extremely valuable asset as it is. It's not yielding too much right now. I think not too much, but that's more of a value play than anything else. That is a very valuable asset.

Next one is Adam Shapton from Green Street.

Good morning. Hope you can hear me. Okay. A couple of questions. Pal, coming back to your comments on buying and selling of assets. I just want to be -- I just wanted to ask you to be clear. Are you talking about 1 strategic repositioning of the portfolio and then sort of back to business as usual? Or do you mean to say that the business model will permanently shift to much higher asset trading over the cycle? And I have another question, but maybe we can start with that one.

We can start on that one. No, what I mean is that a property has a life cycle. You build it, you manage it and then you have a phase where it's degrading and then you have an upgrade phase. And I think Castellum is depending on market and depending on which type of asset type are good in all of these phases, but perhaps not good in all cities and all markets, and all markets are a bit different. And Castellum has had a tendency to own properties over the full cycle. And I think we need to be a bit more smarter in owning the properties in the lifespan of a property where we are the best. And that may vary over time, that may vary over markets and that may vary over asset types what properties that suits us. This means that we may very well own a property during 1 phase of the life cycle of a property in Stockholm but choose not to own it in another market, and that will trigger a higher asset rotation pace than we've had historically. So that's actually what I'm meaning with this.

But also perhaps ceasing a bit more opportunities than we've done historically, when prices are right, either to sell or to buy. So it's not -- you should not read into that strategic that we are down because we are not there yet, downsizing office or increasing whatever, it's just the fact that we cannot be -- it's not perfect from a return perspective to own properties forever and ever. We need to -- we are not a perfect custodian of properties in all their faces everywhere.

Okay. So that's -- so it will be management's acumen and understanding of the cycle and each individual market that will drive better returns after transaction costs according to that.

Okay. And then second question is on CapEx. You mentioned one of the things you'd like to do is, I mean, you said spend less on CapEx, but then I think you sort of corrected yourself to smarter CapEx. Is your assessment that Castellum has been deploying CapEx in the past in a way that doesn't meet suitable return hurdles? Is that what you found and you think you can change that in the future?

That's a good question, and I appreciate that. I think perhaps that was true if we go back 5 or 10 years ago that we -- when money was a bit more cheap and the target actually in Castellum was to invest at least 5% of the property value each year. So it might be some merit to that going back a bit further.

I don't think that, that has been the case for the past years. But I do think that there are potential to improve where we put in our money. In some cases, we should perhaps invest slightly more. And in some cases, we should perhaps not invest anything right now. And there, I think, and looking forward to having discussions with management, where our capital makes the most -- where we get the most bang for the buck. I'm sure that there are potential there for improvement. I would be very surprised if it wasn't because that's probably the case everywhere in all real estate companies.

Thank you. Back to Fredrik Stensved of ABG.

Yes. And apologies for jumping in twice. I just have a follow-up on the leasing strategy. Listening to this presentation and what you're saying, Pal, it's pretty obvious that you're not happy about sort of the leasing this year. You're not happy about the lower occupancy in the past couple of years. I think at the same time, you're saying asset quality or the portfolio quality is better than you were thinking and the organization is better. They know the properties by heart and so on. So maybe in order to get sort of a feeling about upcoming changes and strategy in terms of leasing, asset quality is better, organization quality is better. What's your view on why Castellum has underperformed peers in terms of occupancy and which are sort of the concrete actions you believe are the most important in order to improve going forward?

I'm not sure that we have been worse than peers. No idea that's the case on that. But for a company, for a real estate company, the main mission is obviously to have as many square meters rented as possible. And we have roughly 10% at least economic vacancy. That's a huge, huge potential. I think that amounts to roughly SEK 1 billion in rental revenue, and we must do everything we can to catch as much as possible of that potential rental revenue. And we are discussing internally in what measures makes sense here. And here, it's different depending on what type of assets. So I wouldn't say that we have underperformed, but I've said that we have perhaps increased the discussions around how can we reduce vacancy faster than given the measurements we've done historically.

Okay. Thank you.

Thank you. And that was actually the last question for today. So thank you all for listening. Bye-bye.