Castellum, Inc. Q1 FY2026 earnings call

Back to Basics Strategy - Increased transaction base with two transactions in Q1, including a disposal of 9 properties to 87 with a profit of 750 million. - Prudent with capital by repurchasing almost 24 million shares. - Tightened costs by selling co-working operation and reducing administrative costs by almost 100 million SEK compared to Q1 last year. - Achieved positive net leasing of 82 million SEK, with a large portion from Ericsson. - Property portfolio value is 138 billion SEK, with joint ventures and a mixed-use portfolio FOMIO with 5.3 million square meters leasable area and high sustainability focus.

Income and net operating income both down by some 3% compared to Q1 last year, mainly due to higher vacancies and direct property costs. However, lower central administration and better contributions from EMTRA led to positive income from property management. Net leasing for the period is 82 million SEK, with 72 million from Ericsson in Hagestad. Property values were positive at 416 million or 0.3%. Occupancy now at 88.0%. Net investments in the quarter were $679 million, with $886 million in investments in existing properties and $214 million from property sales.

Net leasing remains positive but the leasing market is still slow. Expect continued slow market conditions in the near term before potential improvement. No specific timeline provided for a rapid improvement in occupancy and NRI growth.

Market conditions have increased volatility, with credit spreads widening during Q1 due to the Middle East conflict. The slow leasing market poses a risk to occupancy levels and income generation.

Q: Regarding quantification of portfolio proportion not meeting return requirement?

A: Difficult to quantify exactly, but there are portions of the portfolio that can meet the 10% return on equity, some borderline, and some that likely won't depending on prices.

Q: On buybacks and divestments?

A: No plans for additional divestments beyond current activity, as there is significant interest in the transaction market.

Q: On value decline and asset class?

A: Value decline is broadly across the portfolio, not concentrated in specific asset classes.

Q: On electricity hedging and share buyback details?

A: Better hedged on electricity costs with a more classic hedging strategy. Share buybacks done via safe harbor procedure due to closed period and share price considerations.

Q: On occupancy definition change?

A: Changed from full period occupancy to end-of-period occupancy for more accuracy, especially at year-end.

Q: On buyers of underperforming assets and operating metrics?

A: There is plenty of interest from various types of investors in underperforming assets. Operating metrics are likely to remain slow until the market reaches a new equilibrium.