Welcome to Castellum Q2 Report 2023. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to CEO Joacim Sjöberg and CFO Jens Andersson. Please go ahead. Good morning, everyone. This is Joacim Sjöberg. I'm here together with the CFO of Castellum, Jens Andersson. Happy to have you all here to listen to our Q2 report. Starting off with the first interesting figure is that we increased the rental income by a total of 12.6%, mainly due to indexations in the rental agreements, but also due to the long and positive trend of net leasing and successful renegotiations, and also some completed projects that have been worked on for several years. We'll come back to that later. The net operating income increased by 10.5%, mainly due to indexations. The income from property management decreases mainly due to higher interest rates and property costs. Of the total increase in costs, financial cost stands for some 60%, and property costs account for the rest. Changes in property values is during the first half of this year, around SEK 6.5 billion. Please let me remind you that Castellum started to adjust the yields already after the Q3 last year. We have already lowered the value of our portfolio by some SEK 13 billion, and that is 8.5% since the top values last year. The bulk of the changes during this period was done in Q1 and continues during this Q2. Castellum has positive net leasing during this quarter, isolated, but since January, it's decreasing, mostly due to some previously known vacancies in the Q1, but more on that later. Overall, demand remains strong, with the same high level of newly signed contracts as in the previous period. We can see a slight decrease in occupancy rate, largely explained by sold properties in Stockholm, Marievik, and also the big sale that we completed with two Axis in Lund. Properties that were almost fully let, and therefore, when they disappear from our occupancy rate calculation, they will lower the rate. We have sold properties of about SEK 3.4 billion during the first half of this year, which we are very pleased with. No need for further sales right now, but by definition, all assets are for sale if the price is right, and the continued divestments of non-strategic assets will happen as communicated earlier. Most of you know this already, but please let me just reiterate our business and geographic presence. The largest portfolios are in the Stockholm area, then we have the West and the Øresund area. That together represents likely around 30% each. Stockholm is 50%, roughly. Then we have, of course, our holdings in Copenhagen, Helsinki, and indirectly through Entra in Oslo. The strategy is to be a leading, sustainable, and Nordic property company, and that remains. We have completed the rights issue during this quarter. With the observance of equal rights of all shareholders and taking into account the Swedish stock market rules, this process did take a while. The issue was fully subscribed without using any of the guarantees and underwriting that we had, and it added just over SEK 10 billion to the company. In the short term, the money has been used to repay maturing bonds and revolving credit facilities in banks. Through the rights issue, Castellum's financial position has strengthened, which clearly shows in the improved financial key figures, such as the loan-to-value ratio of 36.9%, which was, which is a significant decrease since last quarter. It's also strengthened our liquidity position and covers all bonds that mature over the next three years. This gives us a stability in troubled times, and also creates opportunities to create value out of our project portfolio. I now hand over to Jens. Hi, everyone. We report strong growth in income during the period: 9.8% for the like-for-like portfolio, largely due to indexation and a long trend of positive net leasing and successful renegotiation of contracts. Development properties are also a key driver, thanks to completed projects such as the Swedish Police in Örebro, GreenHaus in Helsingborg, E.ON in Malmö, among others, which give a similar effect on the cost side, however, to a smaller degree, due to high surplus ratio in newly built, effective green buildings. Total increase in costs is still high, 21.9% for the like-for-like portfolio, although lower than during the Q1, that summed up to 25% in the like-for-like portfolio. Cost control will be our key focus throughout the remainder of the year and during the coming budget process for 2024. Total increase in costs for like-for-like portfolio for the first half of the year was SEK 192 million, of which SEK 103 million relates to electricity, SEK 30 million relates to property tax, and an additional SEK 30 million comes from increased heating expenses. Please note, a one-off administrative cost of SEK 63 million that is attributable to system development that has now been reclassified. Next slide. As you all know, we have a very strong tenant base, with many of our larger customers being publicly funded operations or listed companies. A good portion, 25% of our rental income, is derived from publicly funded operations. Swedish Police is now also our largest tenant, followed by AFRY and ABB. Our 10 largest tenants stands for less than 15% of our total rental income, and we know tenant rent generating more than 2.1%. Our customers demonstrate a strong ability to pay rent even after factoring in indexation. First, let me comment on the fact that so much attention is paid to the short-term variations in net leasing, as can be shown in this slide, where the net leasing is the light green graph, jumping up and down over the quarters. In our opinion, the quarterly net leasing figures are very poor indicators of our performance. As can be seen, we keep increasing the total rental income despite the quarterly net leasing figures going up and down. It is, however, not unlikely that the rental income will level out in the future if we don't invest heavily, as we have done historically. Net leasing, +SEK 21 million for Q2 standalone, a good bounce -back from -SEK 52 million for the Q1. Rolling 12 months net leasing sums up to +SEK 21 million. Not a high number, but still a positive one. Continued stable demand from our tenants. Contracts, however, are taking somewhat longer to negotiate. No clear trend of tenants taking smaller space, rather a combination where some expand and other decrease space. Bankruptcies, SEK 26 million first half of 2023, which is largely attributable to bankruptcies in Q1 that amounted to SEK 19 million. Higher numbers cannot be ruled out in the current market. All natural in a weaker economy, bankruptcies related to padel tennis, both during Q1 and Q2, explain a large portion of this. We have some events after the reporting date that is worth mentioning, and that is that Castellum has signed a 10-year lease contract with EQT Exeter in Stockholm, 5,500 sq m. We have also signed a five-year extension and a contract with life science company, BioArctic, in Stockholm of 3,300 sq m. We sadly had a bankruptcy after the end of the quarter in Denmark with the auction house, Lauritz.com. Most likely, we will be able to relet that space within a short period of time. Looking at the value changes that Joacim already has mentioned, so I will be very brief here. Key drivers or divestments and changes due to yield expansion, followed by cash flow-related changes, mainly due to future projects with larger portion of uncertainty to account for. Since the end of the Q3 of 2022, the valuations, when valuations reached its latest peak, Castellum has written down its properties with a total of circa SEK 13 billion, which was already mentioned before, corresponding to 8.5%. The aggregated adjustment of the yield requirement during the same period amounted to 41 points. Property values, this slide is just to show that we had a very obvious peak after COVID, and now we have taken down values to a more reasonable level, considering the high underlying interest rates. Continued high interest rates and inflation will continue to put upward pressure on valuations. CPI indexation will mitigate most of the effect over time. Looking at the financials, liquidity from the share issue has been used to repay floating rate loans and maturing bonds. As a consequence, the hedge ratio has increased to 71%, and the loan-to-value has improved to 36.9%. An increase in the underlying interest rate by 100 basis points would increase interest rates of SEK 190 million, compared to SEK 655 million, if the entire loan portfolio was unhedged. ICR, rolling 12 months, currently at 3.1, close to policy level at 3.0. Rights issue will strengthen the ICR going forward while rolling into the 12-month figures. Higher interest rates and expiring interest derivatives will, on the other hand, put continued downward pressure on ICR. Average debts maturity and share of unsecured assets stable over the year. The credit rating from Moody's at Baa3 with stable outlook, and no indication of any negative action to our best of knowledge. A quick glance at the loan-to-value. The loan-to-value has improved, as we already have mentioned several times, to 36.9% during the year. The share issue has been the main factor behind the improvement, followed by divestments and funds from operations. Unrealized value changes of minus SEK 6.6 billion have, on the other hand, put upward pressure on the loan-to-value. Continue with the financials. Average interest rate is 2.7%, up from 2.6% at the end of 2022, despite increasing underlying interest rates during the year by approximately 120 basis points. Excluding cross-currency swaps, average interest rates amounts to 2.4%. Backed by strong Nordic banks, we have successfully increased our secured borrowing during the year. Loan margins from the banks continue to be relatively stable during the Q2 of 2023. New and existing loans amounting to circa SEK 7.4 billion, of which SEK 1.5 billion new loans, will most likely be signed today. Debt capital markets still relatively illiquid, SEK 22.9 billion of bonds expiring in the upcoming 36 months. Available cash and unutilized revolving credit facilities amounts to SEK 24.4 billion. Reduced project investments and no dividend this year will free up further funds. All outstanding bonds could potentially be repaid, given non-aggressive assumptions about recurring earnings and divestments. Our expectation is, although, that the debt capital market recovers within a reasonable time period. No one can say for sure. We need to prepare for worse times in order to safeguard a Baa3 rating, and in the long run, strive for an upgrade. Over to you, Joacim. Looking at our project portfolio, the nine largest projects are all above SEK 100 million and with an occupancy rate of 81%. The key tenants in our three largest ongoing projects are the Swedish Police, a large veterinary clinic in Gothenburg, and then the Swedish battery company, Northvolt. All three are 100% pre-leased. Castellum's total investment volume for the ongoing major projects amounts to approximately SEK 2.8 billion, of which only SEK 1.2 billion remains to be invested. The total investment budget for 2023 is SEK 4.6 billion, including CapEx. The average lease term for the ongoing projects is more than 10 years. In addition, we invest in existing assets. Energy efficiency, improvements for tenants, upgrading systems for access and security, et cetera, are our main focus. But also the daily hard work that is rarely noticed, but it provides the basis for our stable income. During the quarter, amongst other things, we have completed the first facility for SEEL, the Swedish Electric Transport Laboratory at Säve in Gothenburg, with an annual rental value of just over SEK 20 million. Earlier this year, two larger office properties were completed in Malmö to E.ON and to the Swedish National Courts Administration, with a total rental value of SEK 168 million. During 2023, Effekt 13 will be completed to Northvolt in Västerås, and also to Martin & Servera's new headquarters in Stockholm. In total, during the year, completed projects will contribute some SEK 280 million in annual rent value, and the average contract length of these is almost 11 years. In the current market situation, we only start a very limited number of new projects, but we're ready to invest again when conditions improve. Our project portfolio is extensive, with a land bank of some 660,000 sq m, with approved plans of about 60,000 DTA sq m. Some existing investment opportunities can be found in Hagastaden in Stockholm, in Säve, in Gothenburg, and in Södra Boländerna in central Uppsala. During the quarter, we brought forward access by up to two years on one of the planned new building project in Hagastaden, called Infinity, after very constructive talks with the city of Stockholm. In this way, flexibility needed to optimize the projects in relation to the market situation is created. One of our key areas of attention within Castellum is our persistent work to reduce energy use in the property portfolio, and that has resulted that we now have one of the lowest energy use in the real estate sector. The energy use is some 45% lower than the average in Sweden. In the last 12 months, our energy use has decreased by 4%, which exceeds our ongoing goal of a 2.5% annual energy saving. In 2020, we decided to invest on a large scale in expansion of solar cells and solar panels. At least 100 installations should be made before the end of 2025. During this quarter, the 87th solar cell facility has been installed. Today these facilities contribute roughly 12% of our own energy use, corresponding to some 13,000 MWh on an annual basis. The overall sustainability goal is to be climate neutral by 2030. An important step on this way is to have 100% fossil-free energy use, which we are now very close to reach, with some 97% fossil-free use in the business. Key takeaways from this first half year is that we are still experiencing a very strong rental market. The rights issue has strengthened our financial position, we have a very large project pipeline for value creation going forward. In addition, I would like to underline that our strategy, growth ambitions, and geographic position as a Nordic company remains the same. I understand, however, that everyone wants to know when the dividend will return. That's a decision for the shareholders to make, but I'd say it depends on the financing situation and when we see it favorable for Castellum shareholders to pay dividend without jeopardizing financial stability. That leaves room for questions. If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Markus Henriksson, from ABG Sundal Collier. Please go ahead. Thank you very much. Good morning, Joacim and Jens. Three questions from me. First, you highlighted that you have some non-strategic properties for sale. Roughly how much of the Castellum portfolio is non-strategic, and could you also outline what type of property segments or, and geography? We will not disclose what is on our sales list. That would sort of defy its own purpose, but what we can say is that we are striving for having efficient management portfolio, and that means that it relates to geography, it relates to the type of building, but it also relates to whether we can actually create value from these properties going forward. In terms of volume, we have already communicated that we're happy with the sales that we've conducted so far. We will continue to divest during the year, but we have not communicated any goal or ambition in terms of volume. We will continue to be net sellers this year. Thank you for that. You amortized quite a lot, almost SEK 14 billion in Q2. You got cash from divestments, the rights issue, of course. Could you help us out a little bit, when in the quarter you amortized the bulk of the sum, and by how much was Q2 positively affected by this action? The when in the quarter is the key part of the question. I mean, looking at the IFRS, the IFRS effect was very limited, so it affects roughly one month of six. It was conducted early in. It was conducted in the beginning of June. Sorry. around one month, positively affected-. Yeah. the bulk of the amortization? Yeah. Perfect. Thank you. Yeah. Last question. You mentioned that you are ready to invest when conditions improve. Could we get any information regarding construction costs? What do you hear there, and what else do you feel need to improve before you are ready to invest? I mean, the main condition is the reopening of the debt capital market. That is sort of the main driver for us using our cash flow not to amortize, but to invest in the business. If the debt capital market remains as sort of semi-closed as it is, then it will be just the limited cash flow that we have already communicated of SEK 2.5 billion annually that will go into investment. As far as the construction costs, we definitely see a drop in those. But the drop is not nearly enough to compensate for the fact that we need to apply a very disciplined capital expenditure during the next few years. Costs are decreasing, but it won't compensate for the fact that we need to be very cautious. Very clear. Thank you for taking my questions. The next question comes from Lars Norrby, from SEB. Please go ahead. Morning, guys. Net letting back in positive territory again in Q2, and you mentioned a continued strong rental market, demand remaining strong, even though I think you mentioned that contract discussions take some time. Looking into the Q3, and for that matter, the Q4, are you expecting for the year in total to be positive, meaning positive numbers in the second half of the year? Yes, in general, I'd say so. We are, as mentioned earlier, always reviewing divestment opportunities, and that could, of course, affect the total. We have a very attractive pipeline. We have good discussions, and we also have projects that will be completed. I'd say, maybe I'm sticking my neck out here, but I'd say that we anticipate a continued positive net leasing. The size of the pipeline of contracts is similar to the one that we saw one year ago, so there's no real difference. However, the market is a bit more cautious, and it's difficult to say if we will be able to actually sign all of the contracts that we hope to sign. They take longer, I think we have shown the last few days that we have been able to actually come through with a lot of contracts on good levels. Very good. That on, that's on net leasing. My second question is regarding CapEx. I know you are finalizing a lot of big projects this year. I think you mentioned the CapEx figures for 2023 of some SEK 4.6 billion. Isn't that expected to come down quite sharply in 2024 and 2025? What are you looking for in terms of round figures for those two years? It's SEK two and a half billion, starting from 2024. Most of our projects, the larger ones, have already been completed, and a lot of them are being completed this year and next. Will SEK two and a half billion be enough to continue to grow in an orderly way? I mean, it's we have a very cautious plan right now, and I think we need to see some positive signs before we can say that it's time to invest more money. It's good enough for the time being. Those positive signs, as mentioned, mainly relate to the debt capital market. Okay. Well, thank you. That's my questions. Thank you, Lars. The next question comes from the line of Paul May from Barclays. Please go ahead. Your line is open. Paul, your line is open. I think we lost Paul, so I hand the word back to the speakers for maybe written questions. We take Paul after them. We've got one question about when we believe that the debt capital market will open for us, and if we knew that, we would be acting maybe in a very different way from what we're acting today. We don't really know. What is interesting, though, is that the volume of money that has been allocated to the sector and the money that is piling up ringside at the moment is clearly shows that there is an interest to get into this market. People are hesitant because I guess investors don't really know what to expect in terms of interest rates. I guess it all relates to whether the central bank's interest rate increases will stop or not. Our MTN program will soon be updated, and we have our green bond framework, and we are happy to issue if there is interest on reasonable levels. I think, I mean. We're hopeful, but we will not rely on the debt capital market reopening. We will use our cash flow to amortize, and we can do so for a very long time. Actually, with very quick assumptions, we can actually repay all our outstanding bonds up and until 2027, and then we will only have bank debt. That's of course, not our main strategy or main scenario, but it's a fallback and a plan B or C. Are you released there? The next question comes from John Vuong from Kempen. Please go ahead. Hi, good morning. Thank you for taking my questions. You mentioned already several times that investments depend on positive signs in the debt capital markets. If these signs were to come, does that imply that you would cut your sales list short from here then? Not necessarily, because we are, as mentioned earlier, we have a list, an internal list of non-strategic assets, and we have been working on that list for quite some time, and we are doing constantly divestment. Those will continue more for the fact that they are non-strategic to us, and we don't see them creating value over time, rather than that we need that cash specifically. I think on the divestment side, in terms of non-strategic assets, that will go on irrespective of whether the debt capital market improves or not. Does that also mean that on your current sales list, there's also non, so a bit more strategic assets, or is that not the case at all? No, not on our sales list today, but of course, we get questions as we got on the property called Götaland in Jönköping for the Court Administration Authority, which we sold to Vasakronan, and we will hand that over once the project is closed in after the summer. That was a strategic asset, but we got a very good price, and we realized that it will not continue to create value within our portfolio in the way that we wanted. We sold it despite the fact that it's sort of a strategic asset to us. A more opportunistic sale? Definitely an opportunistic sale. Okay, perfect. Thank you. That's clear. There are no more questions at this time. I hand the conference back to the speakers for any closing comments. Well, those are mainly the things that we'd like to highlight with you. Thank you for your attention. If there's any follow-up questions, you can email them to us, and we'll try to answer them as soon as possible. Thank you for your attention. Thank you.