Welcome to our live webcast of Castellum's year-end report for 2021. With me here, I have CEO Rutger Arnhult and Deputy CEO and CFO Ylva Sörby Westman, who will comment and present the results for 2021. I'm Anna Thrän, and I will moderate the Q&A session right after the presentations. First, Rutger Arnhult, you have some pretty impressive numbers to present for us.
I do have. Thank you for listening. The result from the last year, 2021, is amazing. We delivered the best result ever in the company's history, the history of about 25 years. We deliver almost SEK 12 billion in result. So that's quite impressive, also giving the tough markets we have had in the world and in Sweden and every market, as you know. We've done a lot. We have done some single asset sell-offs and acquisitions, but the main thing last year was the acquisition of Kungsleden, and that is now successfully completed. This acquisition really strengthens our position in Sweden. It actually doubles...
Not doubles, it adds 50% to our volume in Sweden, so that's a pretty big acquisition. The Nordic platform is our focus, and we have also done some steps forward in that sense. Since we tried to buy Entra in the beginning of the year. We didn't succeed with that, but we ended up with owning one-third. We today own 33% of the company, and that gives us an indirect position in Norway. That's the only positions we have in Norway, and we are really happy with that. Then as you know, we have a position in Denmark, in Finland. We have in the year over the...
We've also done quite large acquisition in Helsinki. Now we have more of a Nordic platform. These acquisitions improves our earnings capacity going forward, so we look forward to deliver good figures in 2022 as well. The outcome is also a very strong financial situation. We have a solid balance sheet. We have an LTV of 39%, coming out of this, which is very healthy for the company. Gives us strength to deliver continued growth in acquisitions and in projects. The underlying market is strong, and I believe it will even become stronger now when everybody comes back to their offices, which we experience at the moment. Yesterday, driving into work, I...
For a very long time, first time I experienced queues. It took 10 minutes longer, and also when at lunchtime had to queue for lunch, so that's good signs. That is good. We also have a very strong real estate market, so the investment market is strong. It's the strongest ever, and in every market. It's very competitive, so it's hard to find new acquisitions at attractive levels, but we do what we do that as good as we can, and hopefully we will succeed. Going back to Kungsleden, the transaction significantly strengthens our position, mainly in Stockholm, Malmö, and Västerås. The overlap between the two real estate portfolios is about 90%.
There are some areas where we don't have a position today, and we will consider to either keep those or sell those off. That's up for decision going forward. It also creates some possible synergies on the cost side, operational-wise and also financial-wise. It also, in competitive-wise, we don't have to compete with Kungsleden anymore. We are on the same side, so now we don't need to compete about new tenants and existing tenants, and that's really good. The integration process is now in full swing and will hopefully be completed more or less by the time of the summer vacations.
Of course, it will take some time to achieve all these savings and so on, going forward since we have lots of contracts that are running for a while, both financial-wise and operational-wise. This creates a platform, a Nordic platform, these acquisitions we've done. In Finland, we did a Kielo acquisition that added on about SEK 4 billion to our portfolio. In Norway, our indirect holding is about SEK 22 billion. Today, Helsinki is about SEK 7 billion, and Copenhagen is about SEK 6 billion. So that's the platform. It's in total, adding in our portion of Entra, SEK 76 billion and a size of 6.3 million sq m. Quite impressive number.
I don't think there is any other, actually any other company, commercial company in the Nordics that are even near that number of square meters actually. Then the portfolio, what has it become? It's still focused on office. 58% of the portfolio is office. You can see here in the graph. But then also, the most part of the public sector properties are, of course, office. We have a very small portion of retail. Then more or less the rest is warehouse, logistics and light industry. So office, logistics and warehouse logistics, that's the main focus.
80% is today in Sweden, 13% is in Norway, and then three and four in Denmark and Finland, respectively. We have an ambition to grow these areas a little bit. Copenhagen is a strong market and big market. Helsinki is a strong and big market. We like to become larger there going forward. We'll see what we can find there. Looking at the tenant portfolio, it's a very well-diversified one. The customer base is amazing. The largest tenant, ABB, stands for about 2% of the total. The all ten largest tenants, as you can see in the list, they are all super strong, solid tenants.
In total, they only stand for 14% of the total volume, which is quite amazing. I don't think anyone else actually can show anything like that in our sector. This also gives a strong base for us to continue work with the tenants and grow with the tenants and create new products with the tenants. It gives us a very strong competitive position. You can also in this graph see that the public sector is 23%. This is only Castellum without Entra. If we would have added in Entra into these figures, it would increase to about 27% of the total rental market. This graph shows how strong the rental market has been.
It's more or less top levels in each and every market here. You can see a slight increase of vacancies, but it's very, very small numbers. You can see that in Stockholm and Helsinki. I don't think we'll see that continue because there's more or less hopeless to find a new office in CBD. I think you will see that level out. I also think that we will see increasing rental levels. We had a very strong CPI in October last year, which is connected to our yearly indexation in all our rental contracts and more or less all our rental contracts. That was in Sweden 2.8%. In Norway, it was amazing. It was more than 5%, so 5.1%.
They used the November index. We'll see continued growth in rental levels. That's my best guess. Also, due to quite low new construction levels. We see positive renegotiations and positive net letting. As mentioned, we have in the report a net letting of SEK 162 million in the full year. Strong last quarter with SEK 45 million in net letting. Which you can see here. What is also interesting with this net letting is that you can see that it worked a little bit better in the regional, smaller regional cities.
It was actually during 2002 and 2001, we have seen the weakest market in, for us, in the Stockholm region, actually. I think that's due to subways and public transportation. People has worked from home in a larger extent in Stockholm and in New York and in London. Cities where you are more depending on the public transportation than in other cities where you more or less take the bike or the car to work in a larger extent. Maybe that's an analysis to dig into now after the pandemic to see the differences between the Stockholm area and other areas.
Because I think if you do analyze Stockholm, you will end up with the wrong conclusions compared with what it looks like in the overall country. That's interesting. Values uplift. Strong market. As you know, whenever we have sold anything or anyone else, it's often at new record levels. You can also see in the graph here that the yields have been coming down in every market. You can also note here that the turnover last year on the market was about double the size as the year before. It used to have been around SEK 200 billion a year. Last year was about SEK 400 billion.
Amazingly strong market. Going forward, my belief is that we'll see still the same kind of yield levels. Increasing rental levels and increasing returns from operations, and that's where we have to spend our focus to increase the rental levels. I don't think we can benefit going forward from further yield compression. I also believe in increasing rental levels, but I'm not sure, and I don't think that will affect in the medium term the yields because the market is so enormously strong still. Overall, you can see a value increase in our portfolio last year, 3.9%, and this year, 4.9%. Bear in mind that we got 2.8% indexation.
On top of that, hard work, some gains from successful projects, better cash flows from the buildings, and then yield compression on top of that, which is now in this table called required yield. That's the total. Going to projects, we have, as you know, a big project portfolio. It's about SEK 8.6 billion in total. More or less half of that is invested in some pretty interesting projects. We are building new, modern, super efficient buildings, sustainable ones, and in every sense. Lots of glass, low energy cost, even though that, and long leases. You can see in the graph here, in the picture here, for example, the new headquarters for E.ON in Malmö.
You can see a planned project. We have actually done the land job in Stockholm to the left here, Söderstaden. Then also another project in Malmö for the new, what's it called? The Swedish National Courts Administration in Malmö. Pretty nice buildings coming out. E.ON and the new court building comes out in 2023, so next year. More or less fully let. We have some others showing here. That's a new Norrtull building and another court building or public building in Jönköping, and also a new logistics building down in Helsingborg. It varies between office and logistics. This is a major focus for us going forward.
It gives us slightly higher yields than compared with buying buildings out in the market. This adds better yield to the portfolio. It adds long leases, it adds modern buildings, and it also adds buildings we know from inside out. We know what kind of materials are in them, we know the system, and we can also decide what kind of systems we use, which is helpful. The largest projects are listed here. In this one, it's about almost 300,000 sq m. It's a healthy portfolio with really good tenants. It will add about SEK 660 million in rental value going forward during the next coming years.
Most of them are about to be completed. The top one, the largest one, is to be completed in 2026. Not all of them are fully let today. As you can see, the average is the occupation level is 61%, but that's because some of them are not even started. The largest one at the top there, we haven't even started to try to rent it out because it's too long ahead. You can also note in that picture that eight of 10 of them are new construction and only two of them are reconstructions, but we work with both type of projects. Going over to sustainability.
We once again achieve the best prize of being the best in the sector in the Nordics. We are once again the only real estate company included in the Dow Jones Sustainability Index, which is fantastic. We keep on working with sustainability. The ambition is to be carbon neutral by 2030. We have already reduced our carbon emission by 77% since we started in 2007. That's pretty amazing. We'll continue this work, ambition is to reach a level of 50 kilowatts per sq m in consumption. That's in line with these ambitions.
We are in the forefront and we are in every way trying to use new technique to improve our buildings and also improve our returns from the buildings, of course. As you know, we're building some solar energy parks. The ambition is to build 100. We managed to reach the level of 55 completed by last year. We continue that work. Of course, also now with the Kungsleden portfolio on board, we will analyze all these buildings. Some are top-notch, and some are not. We put a large effort there to improve these ones as soon as we can.
I turn over to Ylva to give a view on some of the financial figures here.
Thank you very much, Rutger. Yes, as you heard, we deliver the best result ever, with a strong performance from all parts of the business. The value of the property portfolio increases with 71% to SEK 176 billion after strategic acquisitions and including our holdings in Entra. Changes in values on properties are +4.9%. It's both unrealized and realized value changes. It's mainly explained by lower yield requirements in the market, but also from project gains and gains from building rights. 2021 has been a very strong year in the transaction market in the Nordics. As Rutger said, a doubled volume in Sweden, SEK 400 billion, and a very huge interest from investors.
We have seen declining yields, and the average yield in Castellum's property portfolio at the end of the year is 4.7% compared to 5% at the end of last year. Net income has doubled to SEK 11.8 billion, and the increase is mainly explained by positive value changes in the property portfolio and growing income from property management. Income from property management increased by 4% to SEK 3.5 billion, corresponding to SEK 12.45 per share. In the fourth quarter, income from property management increased by 29%. Positive net letting landed, as we have heard, on SEK 162 million.
This is the full-year figure aggregated for both Castellum and Kungsleden to give you a picture of how the merged lease stock will develop going on. The rental growth in the like-for-like portfolio amounts to 2%. As Rutger said, we have seen stable rental markets, and we also believe that they will continue to be stable going on. LTV decreased to 39%, and the interest coverage ratio increased to 530%. Castellum's ownership in Entra is now 33.33%. We report our holdings in Entra as an associated company as of end of August this year. Sorry, last year. The reporting is based on Entra's latest published report, the Q4.
Our share of profits in Entra is reported in our income statement that you can see here and corresponds to SEK 800 million, distributed as, SEK 161 million from income from property management and SEK 935 million from changes in values on properties and some tax. Property costs in the like-for-like portfolio, the total like-for-like portfolio at Castellum increased with 6.3% due to higher costs for heating, electricity, and snow removal during a colder winter, and also from higher energy prices. If we look at the balance sheet, we have already said we have a strong financial position, a strong balance sheet, and a LTV, if we look at net debt in relation to total assets of 39%.
Our long-term asset value, the EPRA NRV, increased by 17% to 251 due to positive value changes in the property portfolio and growing profit from property management. In summary, we deliver strong results from all part of our business and a strengthened financial position during the year. Now, I will hand over to you, Rutger, to present our outlook and the proposed dividend.
Yes. Thank you. Yes. Try to give you some kind of outlook. We don't give forecasts, but we do have improved earnings capacity as you of course understand. Giving you the outcome of 2021 for the whole company shows that. Bear in mind that the line here with the associated companies will of course be larger next year. That's one-third of the Entra result. As you know, Entra will improve their result in their operations since they are growing a lot next year with this Oslo Areal acquisition they just did here in January. That's something we look forward to have a strong contribution from Entra on that line. Of course, this is the outcome.
We will, of course, get this income indexed by quite a lot, 2.8% in an average, I guess. More or less, all over, 100% index in the contracts. Renegotiations, I believe, will be positive on top of that. Hopefully some increase there. We will work with the synergies on the cost side, and both operational, central and operational, and then also the financials. As mentioned before, it will take some time before you can see this in the picture, but it will be there. The takeaways is strong index that will improve our earnings. Strong position that is also will improve our earnings capacity and earnings possibilities.
We will create synergies by buying Kungsleden. We will look forward to a positive year and strong contribution from the Entra holding. The market is stable. Each and every market we feel is strong and stable. We also experience a very strong transaction market. Going forward, I think that the capital appetite for acquisitions will be there. I believe we'll see slightly higher interest rates coming. I don't think that will increase the yields a lot. But I think that the focus should be on creating value by improving the returns from the properties. I do believe that we will be able to increase the rental levels going forward.
We will maintain our financial discipline so that we make sure that we will keep our rating by Moody's. It's important so that we have the benefit of being able to finance ourselves partly from the Eurobond market in a good way, in a good way. I think we will be able to increase the profits going forward. We'll keep our focus on product development. Some of the products will be completed over the next coming year that will also create both value as is also written in the report, but also cash flows, of course.
We will continue to focus on sustainability because it's good for us, good for the planet, and good for our profits and value creation going forward. That's the main takeaways. To sum up this presentation before we have Q&A with the proposed increase of the dividend to SEK 7.60 per share, which corresponds to an increase of about 10%. This is the 24th time in a row when Castellum increases their dividends. That's something we are proud of, and we'll try to do our best to continue to keep up this positive consecutive trend.
Now it's time for our Q&A session, and you're welcome to join us either by posting your question in the question box in the web player in front of you, and I really already have some questions popping up here, or as you know, you can join the telephone conference by dialing the number stated in the Q4 invite. We will start with the telephone conference. Before we do so, I would like to ask you, Rutger, if you had to pick out one factor that has been imperative in creating these results that you just presented, what factor is that, and how important will it be going forward for success?
Well, the most important factor is, I guess, that we managed to get over 90% in Kungsleden so that we can now fully integrate and create synergies and continue working as one company instead of if we would have had to compete going forward. That's, I guess, the most important single factor.
Okay. Let's start. I hand over to our operator telephone conference to see if we have questions live there.
Thank you. Ladies and gentlemen, if you have a question for our speakers, please press zero one on your telephone keypad and you'll enter a queue. After you are announced, please ask your question. Please hold until we have the first question. We have several questions coming in. The first coming from Fredrik Stensved at Carnegie. Your line is now open. Your line is open for Fredrik Stensved at Carnegie.
Good morning. Fredrik here. Yes, a couple of questions from my side. Starting off with your cost of debt. It's 1.8% fully including all costs attributed to it. Given the balance sheet, do you see any potential to lower it, and to what extent, and during what time span?
1.8% is, of course, not the level we could actually refinance ourselves on today. We could do that slightly lower. That's included with, as you know, we secure some interest rates levels going forward. It's swaps, swap costs and others. There are some loans that we will be able to get cheaper. Some are existing loans in Kungsleden and also some existing loans in Castellum going forward. There is a potential there. The market right now is quite turbulent. We've seen some yield spreads coming up slightly. We don't know what it will be by the time we renegotiate and replace these bonds and secured loans.
We'll see. Hopefully we will be able to lower the average cost of debt a little bit going forward.
That's clear. My second question relates to page 12 of the report, where we can see the property portfolio. You also state the rental value for the overall portfolio on that page. That's based on year-end 2021. Just to be crystal clear, that does not include any CPI adjustments going into 2022?
No, no. That, you have to add on that in your assumptions.
Okay, thirdly, on the loan-to-value of 39%, do you consider it too high, too low, or just about right?
I think it's just about right. Since you know we have to play together with Moody's, and they do some adjustments on that LTV. For example, they don't value goodwill and so on. There are some adjustments. We need to stay at about 39%-40% to be appreciated. Don't expect us to go wild there and increase that a lot. We have to continue to grow hand-in-hand with the profit growth and value changes going forward.
Perfect. Two more questions. One is quite technical, but rather simple. Your hybrid, the first coupon, when will that be paid? I guess it's semi-annual. Will there be two coupons paid in 2022 or just one?
Technical question, Fredrik. I don't know.
We can come back on that one.
Yeah.
Yeah.
Yeah.
Yeah.
I have to come back.
Yeah, no worries.
I don't actually remember what was said in the prospectus there. There's been a lot of things happening since then. We have to come back.
I know.
We have to come back. Sorry.
Yeah, no worries. Finally,
I hate to.
Trading at
I hate to get questions I can't answer, but that one is tough. Technical. It's too too-
Yeah. I always try to
Mm-hmm
... give you a question that you can't answer. That's one theory to me. Final question on discount to NRV. You're trading at a discount currently. Are you considering buybacks, or is that too early considering the consolidation of Kungsleden?
Always consider that as a possibility if there is a discount. With a strong balance sheet, that's an option, of course.
Okay. Thank you very much. Those were all my questions.
Thank you.
The next question comes from Markus Henriksson at ABG. Please go ahead.
Thank you. Good morning. I have a question first on net letting. It states SEK 45 million in several places here in the report, but it's SEK 69 million if we isolate Q4 in the cumulative figures table. Just what is the net letting in the quarter to start off?
In the fourth quarter, the net letting is SEK 45 million. If we look at the aggregated Kungsleden and Castellum for the full fourth quarter.
All right. Thank you. If we exclude projects, I guess we can't really see exactly since the accumulated figures table is based on Castellum before, and now it's the merged two companies. It looks to me like it was quite negative, the net letting, if we exclude projects first. Is that correct? Also, second one, if we look down on the investment portfolio, it looks like it shows negative figures in Central, West, Öresund, and Stockholm. What do you see in those different sub-markets in Q4, and what do you expect going forward?
Which market? Yeah, repeat the markets, Markus.
Central, West, Öresund, and Stockholm.
That's more or less all the markets. What we see is sometimes we should bear in mind that sometimes we do projects there when we do new construction for tenants, that we sometimes lift tenants from a present space to a new one, you know, from an old space to a new one. That happens sometimes. We empty one building and fill a new one, and then after that, we have to refurbish and make the left building more modern. That sometimes affects the figures. Going forward, we'll see that in a strong market in Malmö for us. We actually need more space to rent out.
The acquisition of Kungsleden was very much appreciated by the organization in Malmö. Gothenburg continues to be strong west. We have had a lot of small new leases coming out in mid. Stockholm has been slower. Stockholm has been significantly slower. Actually over the last two years, I would say, 2021, Stockholm has shown the weakest performance. I think that has to do with the larger extent of working from home. I really noticed that in our group, it has been the Stockholm office that has been most empty. It has been in Stockholm where the parking lots outside the office building has been empty.
If you take the car and go to Linköping or Uppsala, Västerås, the parking areas are much more filled with cars. We have stayed home to a larger extent than in other cities. I think we will see that probably bounce back. You can also see it in the market, the vacancy figures from the external parts here in the report that you have seen a small uptick of the vacancies in Stockholm and also in Helsinki. Maybe they experience the same situation.
Thank you. You mentioned that the integration is going well in Malmö here with the merger. How is it going in Stockholm where Kungsleden was the larger property company with more employees? How do you foresee how fast the communicated synergies related to the merger will materialize here in the coming years?
It's depending on what kind of cost savings we foresee, it takes different time. For example, the Kungsleden's administration of rental rents, salaries, bookkeeping and invoicing and those things were externally handled. We will bring that home. We will lower the cost, increase the quality, but that will take at least a year, since we have to pay for these services for another 12 months or for the full year, not 12 months, no, but the full year. Some financial contracts are of course fixed for a certain time period. We have to wait until they expire.
I will say all in all, in 18 months, we'll probably have the synergies we can get from cutting costs, operational-wise, and financial-wise, more or less. Then there is another synergy, which we haven't put a figure on, but that the competitive situation that we don't need to compete with a large competitor anymore. In some markets, that's important. Since we don't need to compete with Kungsleden anymore, we'll probably be able to increase the rental levels in some markets a little bit and some specific minor markets where we are neighbors. That's also something hard to calculate on, but something that we definitely expect to come out from this.
Thank you.
Just-
The question is how the integration is going. It's going well in Malmö.
Yeah.
How is it going in Stockholm, for example?
Yeah, it's going well everywhere. It's different. We have also, as you noticed, created a new region. Now Västerås and Uppsala is one region instead of Uppsala being a part of Stockholm. Now Stockholm is gonna be standing alone and Uppsala is together with Västerås. Västerås, Kungsleden has a very strong position in Västerås. They do have external property caretaking. The Castellum people will take care of the Kungsleden properties together with Kungsleden and the man who was in charge of Västerås for Kungsleden will be in charge of that region.
Our man in Mitt, Per Gawelin, will take care of all the Kungsleden properties in his region, and he will turn over the Västerås portfolio to Kungsleden guy. In Stockholm, we have a man from Kungsleden, and he is now starting to integrate that group. We're still working from two different offices. We do have several offices in smaller offices in Stockholm due to the tough, you know, commuting situation. The main office is divided in two. That integration starts now. It just started now. In Gothenburg, same, integrating the two, and as in Malmö. It's in full swing.
As we mentioned before the summer vacation, everything will be in place. From then on, going forward, we'll probably see some cost savings. Of course, some of the cost savings are already here. You know, management, top management, has become a slightly fewer board. We don't have costs of two boards. We don't produce two annual reports in the same, you know, not same type of quality anyway for Kungsleden. We don't have to pay for Nasdaq and so on. We don't have to pay for EPRA, and those things are coming in quite fast. It's a timeline of one to 18 months, I would say.
Thank you. Last question. You mentioned before that you had a few non-core assets. Have you divested all the one you want, or should we expect more divestments going forward?
You should expect some more divestments going forward. We would like to focus the portfolio slightly more than it is today. We do have some smaller positions in some cities. You know, there are some single properties in single cities, two properties in one city and so on. That's not the way going forward. We sell those when we get a good price for them, maybe as portfolio, maybe as single assets. That will create room for further acquisitions in our more focused markets.
Thank you very much for taking my questions.
Thank you.
The next question is coming from Mr. May at Barclays. Please go ahead.
Hi, everyone. It's Paul here from Barclays. Hi, Rutger. Hi, Ylva.
Hi.
Just a couple of questions. Hi. Just a couple of questions from me, and they're sort of, I suppose, reiterating a little bit from questions earlier. You mentioned around the LTV level, and obviously that being a focus for the rating, but there are other ways to increase leverage as we all know from an equity investor point of view, things like the hybrid, which doesn't get fully reflected within the LTV and the rating agency's view. Are there sort of thoughts to further increase equity leverage through various means moving forward, whether that's D shares, pref shares, further hybrids, in order to accelerate the growth profile? Or do you feel that the sort of strong balance sheet and strong position that Castellum has worked towards previously will be maintained?
I suppose the issue being that other means of increasing equity leverage obviously come with significantly higher cost than bank financing or bond financing. Just wondering how that kind of tallies with the low interest rate, sorry, the low yield environment, potential for interest rates increasing, and how that all sort of works together. I've got another question sort of tied to that afterwards.
For us, given the situation that we can borrow quite attractively, I believe that the preferred shares and D shares is not gonna happen. We were very happy with being able to do the hybrid at 3.125%. At that point, that one has spread away now. At the moment, it's not unattractive, but there is no need for us to do a hybrid. The instrument is there, and there are some limitations in regards to rating, but we are not close to the limitations. We could issue more hybrid within the framework of our rating. I would say hybrid going forward, that's a possible way. D shares and preferred shares, no.
Joint ventures is another way, like, the ownership in Entra. We get the result, but we don't carry the balance sheet, even though their balance sheet is very strong, and their rating is very strong. That's another way we could consider joint ventures like Entra in maybe Helsinki and Copenhagen to become a part of a larger portfolio. There's not been any transactions in that direction on the table, but going forward, maybe we can find volume by institutions who might be able to wanna be a part of a company instead of owning themselves, and we can get them as local owners in portfolios like that.
You know, an Entra of SEK 50 million or something in Copenhagen or Helsinki, and we have one-third, that would be SEK 20 billion. For us, that would be a way to grow also. We maybe just an idea. We avoid joint ventures mainly in Sweden, since we are large enough to stand on our own legs. We have one JV in Gothenburg with the harbor, with the town, and that's the only one actually. That's the way going forward. Not changing much. We maintain the strong LTV, and we have to have a few percent headroom there since compared with Moody's. Moody's like to see 45% at the most, the highest.
We need to have a few % between what we report and what they do because they do this haircut on the assets.
Cool. Thank you. You know, on that, it's I mean, it appears that there's not going to be a major change to sort of previous strategy. My view was that the Kungsleden strategy was actually quite similar to the Castellum strategy, hence the merger made a lot of sense. As you say, it's sort of integrating well and progressing well forward. What's likely to change in terms of strategy moving forward? What is it you feel wasn't being done in the way that you would like it to be done and you feel will be accelerated or changed? Is it, you know, new acquisitions in new areas? Is it acceleration of the development pipeline? Is it acceleration of the disposals in non-core areas and focus on investments? Trying to get.
I suppose trying to get a sense, and I think there's so many questions.
Yeah.
What is Castellum going to be in the next sort of 12 to 24 to 36 months, relative to where it was previously?
Yeah. I think you will not see much change in Castellum. There's some change where, you know, the Kungsleden didn't have the same focus on. They did have the focus, but they were not really there yet. They were just about to become more energy efficient and so on. We have a lot of work to do on the real estate level in their portfolio. We have come further, I would say. We also in Castellum have a larger focus on project development. We'll really go through and see what kind of possibilities there are in the Kungsleden portfolio. We also look at other possibilities or meanwhile all the time.
Continued strong, maybe even stronger focus on project developments due to the tough acquisition market. Even stronger focus on that, even stronger focus on getting near and close relationship to your tenants. I'm trying to. Maybe there is one change. More or less the same, but I'm trying to look on the business a little bit opposite. We start with the people, the guys and girls who are renting out the empty square meters and taking care of the tenants. They're doing their job. What we are, everybody else of us, we're trying to help them. I try to turn it upside down, the organization a little bit. We are supporting the ground team. Maybe that's a new view.
I don't know. Maybe it is. That's the way I view it. We're here to support the team that meet the tenants and then also push them to meet the tenants a little bit more, or as often they can. That's the difference between Kungsleden and Castellum, because we would like to have. If there is a maintenance guy coming out to a tenant, it should be Castellum on the jacket, and not some other company. If the tenant has a view on something, we need to, you know, get that all the way into the organization and help out and respond to any requests. Maybe that's a difference. Try to be a small company.
Okay. Not looking to do any sort of major acquisitions, M&A deals?
No.
Yeah. Probably that will continue elsewhere in the
No
in the market.
No. We are always open for a major acquisition also, like Kungsleden. If there is one, you are not allowed to miss it if it's a good one. That would be very bad. They don't come that often. If they come like Kungsleden and Norrporten did a few years ago, then of course, we'll do our best to take the opportunity to create something bigger and stronger. I do believe in larger volume. Even though we are strong in most and every market we operate in, we are still. It's a huge market.
As you know, real estate is the largest asset class in the world and in every city, and we have a small portion in each city, and so we always have lots of competitors. The stronger we become, the better we can deliver, the better our offer is for the tenants. The easier it is to help them. We can definitely become larger in every market compared with today and save and do have benefit from it. We need to be small, we need to be local, and we can't allow ourselves to consider ourselves as, you know, a gift from God and so on. We must be there locally.
Cool. Just follow on, just to sum it up. Apologies. One last one. In terms of moving forward, you see Castellum as being a strong balance sheet, relatively lowly levered compared to peers from an equity leverage point of view, focused on growth, focused on total returns, rather than necessarily focused on buying, say, high cash flow and financing that with low cost of debt. Is that? Would that be how you'd sort of classify the future? It's focused on growth, focused on total returns.
Yeah. It is
not necessarily just purely on a spread.
It's tough to buy high cash flows. I rarely see that. Sometimes we manage to achieve it in new developments, try to create good cash flows in new developments, being smart there, and also being able to, as a large player, being able to maybe turn a less attractive area into something more attractive. Like what Castellum is trying to do in Säve, in Gothenburg, outside Gothenburg, an area quite far out, try to create a business hub with some pulse, create something attractive there, focus on those kind of things. Then you can really create value and cash flow if you succeed.
Going forward, continue to become larger in Helsinki. Really focus on trying to find acquisition possibilities there, and the same thing in Copenhagen. Not all over Finland, not all over Denmark, but mainly focused on Helsinki and Copenhagen. Since it's big markets and we are very small there. 3% and 4% of the total value are located there today. Maybe we could reach 15% in Norway, 5% in Denmark, and 5% in Finland before year-end. That would be nice. We have 75% in Sweden and 25% outside Sweden. Maybe a short-term goal for us, something like that, so that we push ourselves to find things a little bit. We'll see. That's pretty much the same as before.
Nordic platform, stable finance, close to the tenants, focus on developments, focus on sustainability, which is very profitable if you do it right.
Perfect. Thank you very much.
Thank you. Thank you.
We have a question coming from Axel Ragnarsson. Please go ahead.
Hi. Yeah, sorry. Had something in my throat. Latching on a bit to the last question regarding Helsinki and Copenhagen. Are you looking for anything particular there, or is it just widening in total?
We look for office and logistics and nothing else.
Nothing else. Okay. The rest of Denmark and Finland, are there any cities that are of interest to you, or is it just the capital regions?
In Denmark, Aarhus, Roskilde, they're too small, actually. It's very small markets. If you go in there, you cannot go out, and it's the same in Finland. It's maybe Tampere. Maybe focus on Helsinki. Of course, if we find a portfolio that includes a few other healthy cities. There are some more healthy cities, as you know. It will not stop us. We try to focus on Helsinki. Since we have a small volume, we would like to start with, you know, become larger in that the major market we are in.
Going forward, we might be able to in Finland be more than the one town, but in which we already are. In Denmark, I think we try to avoid it because other markets are so small compared with Copenhagen.
Okay.
It makes more sense to diversify to another country, actually, in my view. We're not there, but in the future, we'll most likely go outside the Nordics, but that's not on the table today.
If it were on the table, what countries do you see as the most likely that you expand to first?
It's too early to say. We have to analyze that. We follow it, and we've been following other markets for many years, but it's not on the table for the moment.
Mm.
Mm. So, but, so if you-
Uh-
If you find out something interesting for us, please, come back.
I will. Looking at Norway,
We need management. In that case, we need management on board because we would like to be local, and we are not local today. If we do an acquisition, we'll probably most likely in the future, it should include local management.
Okay. Looking at Norway and the Entra position, are you all set at 33%, or are you still looking to acquire the entire company?
I think it's quite tough to be able to get Erik Selin and Balder to sell their part. They like it as well as we do. They can continue buy since they passed the bid level, and we can't for the moment. We have to go through that quite costly decision. As I mentioned, we're happy with the situation. We have 33% and we're also happy with having Balder on board. It's a good owner. I think we just have to live with the situation. I'm also happy that we have some other owners on board there, so it's not only us. We have a good relationship with the company.
We speak with them frequently and go through strategy and reports and so on and discuss and give our view. It works well. In contrast, contrary to Balder, we don't own any other buildings in Norway and are not even looking after that either. It's not on the schedule to buy anything on our own in Norway. We're happy with the position, and we are not competing with Entra in Norway. Instead, we look in Copenhagen and Helsinki. If there is any project coming up in Norway, we send it to Sonja and Entra, so they can dig into it.
The two last questions more of.
No more questions.
Here in Sweden. Your headquarters, now that you've merged with Kungsleden, will that be only in Stockholm or will you still have the Castellum headquarters in Gothenburg?
It will be both. We have a divided head office so that we can have people on board at the head office in both Gothenburg and in Stockholm.
Mm.
I-
Uh-
Used to have that as the CEO of Klövern. We had the same in Nyköping and Stockholm. It worked really well. We always kept, for example, salaries and bookkeeping and invoicing and all of that in Nyköping. We just let it be there.
Lastly, as Ylva leaves the company later this year, will you have a new Deputy CEO or will you manage without?
Oh, I take over that role myself. It's great fun to do the bookkeeping and annual figures. I don't know. We're happy with that. No, actually I'm joking. We announced that this morning, so it's out there.
Yeah
We have already.
Will the new CFO also take the position as Deputy CEO?
Oh, no. Okay. Sorry.
Thank you.
She will not. Head of Treasury is Jens Andersson. He's here beside me, sitting here drinking coffee in a room, talking with the banks all day, all night, already. Jens Andersson will be in charge of the debt and treasury.
No deputy CEO.
Okay.
No. No.
No, no Deputy CEO going forward.
No, no.
Okay.
No.
Great. Thank you so much. Those were my questions.
Thanks. We can, as you noticed, Maria comes from Kungsleden, so she's been working with Ylva for how many years is it?
It's six years.
Six years. Used to be an accountant before, so she's really-
A superstar.
superstar.
Oh, good.
Thank you so much for the telephone conference. I think we need to stop you there. A lot of interesting questions from you. We still have some from the web, and I will just pick up a few if it's okay with you that we will prolong this a couple of minutes. The first one I spot here is from Green Street, Peter Papadakos, and he is actually talking more about synergies and would just like to know, will you give guidance on synergies going forward quarter to quarter so analysts can track this?
I doubt we will. It will be tough to track because we will change the portfolio. I doubt we will. We have considered it. We haven't decided yet, but I doubt we will. Hopefully it will show up in the figures anyway with improving, you know, lowering costs per square meter and so on. I doubt we will report it. It will be too difficult. Some is very easy to report, but some is tough.
Yes. We have a question from Stefan Andersson, SEB. Yield is unchanged quarter to quarter, but I guess you have some yield compression and the unchanged level is a result of mix change with acquisitions. Could you possibly share what the yield compression in the quarter was?
There are some yield compression in the portfolio, of course, and in the market. I don't have the exact figure. I don't know if you have, Ylva.
Was the question how big the yield compression was?
There are some yield compression.
in the quarter?
It looks like it's unchanged, but that's an effect of merging the two companies.
Yeah.
I'm not, I know that there are some yield compression, but I don't actually know the exact figure.
No. No, not me either.
We can come back. We can calculate on that. Of course, we do have it somewhere. We can figure that out. We can give you that figure later.
Great. I will share two more questions before we end this session. One is from Carl Hjort. Can you compare the Stockholm and the Oslo office market differences and similarities?
They're quite similar. You have this hotspots outside the CBD. You do in both cities have a strong will of moving into CBD. You do see increasing rental levels in CBD in both cities. They are quite similar. They're quite similar I would say.
Okay. The last question that always comes up during these sessions, let's take it one more time. It's both from David Johansson and also from Jeff Senol at Mirabella Funds. Going forward, given the geographic overlaps and the importance of scale, would it be reasonable to assume a merger with Fabege, and when would that happen?
We're focusing now on the merger with Kungsleden. Going forward, you know, you never know what we do. I got that question so many times regarding Fabege and Klövern. Since we bought 10% in Klövern in 2008, I got that question every second month for so many years. They actually merged last year. Maybe we will in the future merge also. The future will tell, but now I think they have full focus on merging with Klövern, and we have full focus on merging with Kungsleden, and it is a lot of work to do. The future will tell. For now, we are competing full time, and that's maybe healthy also to compete between the companies.
Sorry, before we end, we have an answer regarding the hybrid. The payment will take place once per year, and the first payment of the coupon will be in the beginning of March.
Perfect. Got that sorted out.
Great. I do have some more detailed questions here that we can maybe get back to you by email because we also value your time, and we wanna be pretty much on time anyways. Thank you so much for this great interest, and wishing you a great day going forward.
Okay. Thank you for listening and just come back if you have specific questions, just call us.
Thank you very much.
Thank you.
Bye-bye.