CWQXF - Castellum AB (publ) (CWQXF) Q4 2023 Earnings Call Transcript

2024-02-14 13:10:23 ET

Castellum AB (CWQXF)

Q4 2023 Earnings Conference Call

February 14, 2024 3:00 AM ET

Company Participants

Joacim Sjöberg – President and Chief Executive Officer

Jens Andersson – Chief Financial Officer

Conference Call Participants

Lars Norrby – SEB

Jonathan Kownator – Goldman Sachs

John Vuong – Kempen

Markus Henriksson – ABG Sundal Collier

Frederic Cyon – Carnegie

Presentation

Joacim Sjöberg

Good morning, everyone, and welcome to this Q4 and Full-Year 2023 Presentation from Castellum. I will start by saying that our core business continues to deliver stable results, for which we are both proud and happy. Our total income increases by 9.8%, mainly due to indexations and completed projects, more on that later. The income from property management decreases, mainly due to higher interest costs, of course, while the NOI increases by 12.5%. Financial costs increases by approximately 42% and in addition, the central administration and results from Entra negatively affects our results.

In total, we have had changes in the property values over the year of minus 9.5%. That corresponds to the amount SEK14.5 billion. Those changes are for the last quarter at SEK6.3 billion. The average yield requirements is now down – up to 5.62% compared to 5.01% at the beginning of the year. So, it's an increase of 61 bps over the year. Our net leasing was negative minus SEK67 million, mainly due to increased terminations during the last quarter. And for those of you who have heard me predict a positive figure, I can only say that I did not really expect the high number of terminations towards the end of the year, more on leasing trends later on in this presentation. We see a slightly decreased occupancy rate that is negatively affected by divestments of fully-let properties, so the statistical effect is already given.

So, for those of you who are new to us, Castellum is one of the largest listed property companies in the Nordic region. We're a fully integrated company with local hands-on presence where our assets are located. The property portfolio is located in attractive growth regions in the Nordics and we're exposed to the robust market in Norway via our holding in Entra. On the map, you see the locations of our property portfolio and the size of the circles represent somewhat of our property size, property values as of last December sums up to SEK160 billion, including our share in Entra. Of those SEK160 billion, 73% are located in the main metropolitan areas, i.e., Stockholm, Oslo, Gothenburg, Malvern, Copenhagen, and Helsinki, of course. 50% of our square meters, that is about 5.5 million square meters, are sustainability certified and that has actually taken us through the goal for 2025. More on that later. And we have a yearly contract value of approximately SEK9.2 billion.

So, the income is showing good growth, with an 8.9% increase in like-for-like holdings. There's some currency effects on our portfolios in Denmark and Finland, and if we exclude them that – that – those are adding about 1%. So, the net is some 7.9%. The completed projects have made a significant contribution, boosting the income by SEK374 million compared to the same period last year. The notable projects include E.ON's new headquarters in Malmö and the new court building next to that also in Malmö and the police building in Örebro. The completed projects, together with the like-for-like portfolio, are the key drivers increasing the income. However, growth is weighted down by transaction. We are, as you may know, net sellers throughout 2023.

The direct property costs have risen 4.2% and that's in the like-for-like portfolio. The increase is significantly lower for the fourth quarter, mainly due to lower electricity costs in that quarter. The increase in property and central administration is mainly attributable to one-offs and more on that later as well. So, there is very little changes in our top tenant list, and the list represents a cross-section of Nordic business and authorities, and our exposure to individual tenants is very low. Our ten largest tenants represent less than 14% of our total contract value and no tenant generate more than approximately 2.3% of our rental income....

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