Castellum AB (publ) (CAST) Earnings Call Transcript & Summary

Hi, and welcome. Today, you will take part of a presentation on the public bid on Kungsleden. In end of this hearing, there will be time for a Q&A session. And there will also be participating our CFO, Ulrika Danielsson, and our Head of Sustainability, Filip Elland. You will ask your questions by writing them in the chat here below. Now I will hand over to our Chairman, Rutger Arnhult. So please, Rutger. Go ahead.

Thank you. Well, thank you for joining, and I will give you a presentation of the bid of -- Castellum bid on Kungsleden. I'll give you a glance of how Castellum looks today and also how -- Kungsleden looks today and what the merged company will look like and what our ambitions are. So -- and my name is Rutger Arnhult. I became the Chairman of the Board in end of March this year. I've been a long-term owner in the company. Before I came to the Board, I have worked in the real estate sector for more than 30 years now. So quite a long history in the sector. The deal -- I need to use my glasses, otherwise, I can't see my notes. So in October, in the 1st of October, today, we have started acceptance period. It started this spring by taking contact with Kungsleden. After we tried to do the Entra deal, we looked around. And we have been watching Kungsleden for a long time, and we announced a bid this summer. And the structure is 70% paid by shares and 30% paid by cash. Could I have notes in front of me here, maybe? Just a -- and the value -- can I move it a little bit closer? Sorry. Here we go. Here we go. 2-week glasses. Sorry. So the bid consists of cash bid and share bid. And the price on the bid level was SEK 124.90 million. That's -- which amounts to a total bid of SEK 26.9 billion. The offer -- sorry. It's hard when I can't see. Sorry, it's too small. Can you change the picture so I can see here? Okay. And the offer represents approximately 20% premium on the NAV (sic) [ NRV ] in Kungsleden, and it's about 7.5% premium on the share price at the time of the bid. We got the recommendation from the Board of Directors in Kungsleden that enormously recommended the Kungsleden shareholders to accept the offer. We also got this supported by a finance opinion from Svenska Handelsbanken. To clear -- to get the deal most like to go through, we managed to get Gösta Welandson, Ilija Batljan and Olle Florén that, together, approximately owns 26% of the outstanding capital on votes in the company to -- irrevocably undertaken to accept the offer. We also have had an extraordinary general meeting held 26th -- 27th of August in Castellum, where we got the allowance from the shareholders in Castellum to go through with the bid. On the 10th of September, we got the competition -- the clearance from the competition authority in Sweden to go through with the bid also. And Castellum has, after the announcement, acquired another -- or not another but acquired 21.3% of the shares in Kungsleden. And that corresponds to 9.9% of the outstanding shares and votes. The offer is not subject to any financial conditions. It's totally and fully financed on Castellum's available funds. The value creation, we are looking forward to unlock shareholder value through the scale, best practice and a combined focus on growth markets. We will create the largest listed commercial company -- commercial property company in the Nordic region with a strong balance sheet. And we will maintain the strong Moody's rating that will enable us to get attractive financing terms and enhance the competitiveness. In total, we assume that the annual synergies will be about SEK 285 million. The commitment from Castellum's Board continue to retain the financial policy approached and embedded in Castellum and Kungsleden. Also, following the completion of the offer, the Board of Directors of Castellum will offer Biljana Pehrsson and Ylva Sarby the same positions in Castellum as they hold in Kungsleden today, as the CEO and as the CFO in the company. It's an attractive offer. It's a premium on the NAV of about -- depending on what kind of metrics you use, but it's about 20% premium. And it's also a premium of 7.5% of the last price paid for the share. The combined portfolio of Castellum's SEK 122 billion and Kungsleden's approximately SEK 43 billion, we will together end up with a portfolio of SEK 165 billion in the combined company. In that figure, we include the ownership in -- indirect part of the ownership in Entra, which is about SEK 19 billion. In total, it will be 5.8 million square meters. And it will enable us to do a lot of synergies due to the big scale. It will be the Nordic #1, the largest Nordic #1 listed company. We do have an attractive financial and dividend policy. We will never have an LTV above 50%. Today, it's 38%. And due to our ambition to withhold our nice strong rating of Baa2 from Moody's, we will not nearly come near to the 15% in reality if we would like to maintain that. So -- and also, we have an ambition to never exceed 2.0x in interest coverage ratio, ICR. And today, it's 5.3. So it's very, very strong. Our ambition is also to grow annually our income from property management by 10% yearly. That's not a very ambitious goal, but we have the possibility to reach as far as we analyze the situation. We also have an ambition to distribute 50% of our income from property management to our shareholder asset dividend. We have a long, strong history of distributed dividend to our shareholders, actually, the longest among the listed companies in Sweden. The combined company will unlock possibilities to take advantage of properties -- take advantage of economies of scale, best practice and will be focused -- continue to focus on growth markets. We will have a strong -- and we will maintain a strong balance sheet. That's one of our more competitive parts. We also focus on the ESG and the sustainability that will -- it's very important going forward. We are one of the companies included in the Dow Jones Sustainable Indexes (sic) [ Dow Jones Sustainability Indexes ], 1 of, I think, 6 Nordic companies, 6 or 7. We also have been ranked #1 by GRESB for several years. I think it's now 5 years in a row, actually. And as I mentioned, the synergy is SEK 285 million annually. SEK 185 million comes from operational synergies and about EUR 100 million comes from financial synergies. This is the indicative time plan. We are now at the 1st of October. The acceptance period started yesterday. Next in line here is our interim report of the Q3 from us. From Kungsleden, that's the 19th of October. And the acceptance period ends at the 29th October. And we will get the final result at the 1st of November. And we expect to start the settlement at the 4th of November. That's our time plan. Looking at Castellum. It's a big company. We have 440 employees. It's about -- sorry, 3.8 million square meters. It's 558 properties. 26% of the volume comes from -- the income comes from governmental authorities. The volume at half year, second quarter, was SEK 97 billion, as you can see here. But since then, we have bought some -- I will come -- I'll show that in a picture later. And we do have a Baa2 rating from Moody's. What's happened this year? We have bought 9.9% in Kungsleden over the stock market. We have also bought 31% of Entra. We didn't go through. We didn't manage to buy the whole of Entra, but we have at least managed to buy 31% without any dilution in Castellum, which we consider as a very good position in the Nordic market through Entra. And it also ticks in the box on our ambition to be a Nordic-focused company. We have also expanded in Finland. We bought a portfolio of SEK 6.5 billion around Helsinki, called the Kielo portfolio. And directly after, we sold off SEK 2.1 billion out of that property. We didn't really think fit into our existing portfolio. We also acquired 2 office buildings in Stockholm and sold 1 in Copenhagen. The one in Copenhagen, that will be fully vacant. And we bought one in Stockholm for the same amount of money that's fully let actually. So a good switch there in our view. And then also we sold off in 2 transactions, SEK 10 billion of properties of logistics to Blackstone during the spring. So that's what we have done so far this year, some acquisitions and some sell-offs. Quite big volumes, but we have really, really focused the portfolio to the markets we would like to be in. Kungsleden at a glance. Approximately 133 employees. It's approximately 2 million square meters, has 207 properties valued at SEK 43 billion. 90% of the portfolio actually has an overlap on the Castellum portfolio. So it's hard to find something that fits even better together with Castellum. And approximately 18% is government and authorities. And it's a high-quality portfolio, mainly focused on Stockholm, and it actually increases the Castellum portion in Stockholm. I'll show that later on in the table. Some pictures, some examples from Stockholm, Gothenburg. And this also shows some of the few -- of the properties. This is, as you can see, commercial focus. It's office, but also a small portion of logistics fits as well. So it's rational. It will strengthen Castellum as a leading commercial property company in the Nordics. We have a leading position, and we'll further strengthen it and -- since the portfolios are matching so well. The combined experience will also, in my view, create a very, very strong team. We'll get the strongest and most forceful team in the Nordics. We also become stronger on the development side. The combined development portfolio will be amazing and even bigger than we have today in Castellum. So we add on interesting things into our existing portfolio. And as you know, we have a very strong development -- how do you say, property development department within Castellum. It gives us a very diversified base of tenants in different sectors. And that really gives us a stable base for continued strong and stable cash flows. We also have joined together on being the Europe's most sustainable company -- or one of the most sustainable. This becomes more and more important each day. And I think going forward, with more climate crisis and so on, it will just be more and more focused on this. So try to be on top, try to be in front of sustainability so that we turn over a very clean and nice company to our kids in the future. And there is a significant value creation through synergies in the deal. The SEK 285 million business saved can be transferred into the yield calculation. And you can figure out what kind of value creation we can make out of -- from that. So that's very interesting. It has -- we have an attractive financial policy. We will make sure that we keep our ratings and keep our ability to borrow at very, very attractive levels on the Eurobond market and from the Nordic banks, of course, and international banks. And we do get a very, very nice team, a strong team of experienced management that will -- that we now, hopefully at the beginning of November, can start to form so that we get the best team to execute on our strategy going forward. The combined company, it's interesting to see. This picture serves the largest commercial property company in the Nordics. Castellum is the largest with SEK 97 billion. And Kungsleden is one of the largest ones also with SEK 43 billion. The combined company, SEK 140 billion. And then adding on the acquisitions we have made and a proportion of the Entra portfolio. So indirectly, since we own 31% of Entra, we look upon it as we have a position in Norway of SEK 19 billion. We also will account it as a company of interest. So you will see what kind of income that part of our investment gives us in the Castellum's figure. So that's really good, improves our ICR and profit per share, of course. Combined, it's SEK 165 billion. So we are more than double the size of our second largest competitor in this table here. This picture shows how we complement each other. The green dots, that shows the overlapping cities. And as you can see, it's only -- more or less only in Gävle. Kungsleden doesn't own any properties. Otherwise, we have an overlap in each city. This picture also shows that the Stockholm market increases. You can see the light blue part of the Stockholm line really increases. So actually in value, Stockholm is becoming larger than the Gothenburg. But in square meter, Gothenburg still is the leader. So they can compete together in the future about who is the largest. And then the Gothenburg team can always go for the square meters and the Stockholm team will probably focus on market value. So it's 90% overlap. And this really will strengthen our customer offering in each and every market. Showing this picture, you also see that we will probably most likely sell off a few buildings at the bottom list here to make sure that we are focused and also to make sure that we keep our low LTV in an attractive LTV level in the company going forward. This is an example of how we fit together in Stockholm. You can see that we add in a portfolio that really strengthens our position in Stockholm with a handful of really, really nice real estate assets coming in from Kungsleden. And we get a much, much better combined portfolio in Stockholm. Now we are in the most interesting markets and areas in Stockholm with a significant amount of square meters. So our offer to our tenants will be really, really much better. This shows that we are focused on -- in strong regions. The left, the scale here, it's a population growth. On the right is growth in income. And you can see that the major cities in Sweden, Stockholm, Gothenburg and Malmö are all in tough -- based upon income growth. And you can see that we are well above average with more or less the whole portfolio. 90% of the portfolio is above the average, which is very, very strong. And this is only because the company has been working hard and focused on strong growth areas for many, many years. And the same situation has been in Kungsleden. That's why their portfolio is like it is today. They have sold off less -- regions with less growth. The combined portfolio, as you can see, Castellum and Kungsleden, has a large portion of office, a neat portion of industrial and warehouse also. So the combined company will have 14% warehouse but 58% office and only 6% retail. I think 6% retail is something you should have in an office company. Retail is not so favorable these days. But you need some of the retail to have an attractive offer to your tenants because the tenants are using the shops and coffee shops and services provided by the retail sector. So that's important. You can't have zero, and then you have misunderstood how it works. And then we have a lot of development on land. Going forward, we will have a very strong pipeline of more than 20 big projects going on in the combined company. And the Stockholm part here in this picture shows that it's 34% of the value in the company, of the SEK 140 billion of value. Finland is slightly stronger now after the last acquisition. It doesn't show in this picture, but that's because it's after -- it happened after. So we have a slightly stronger position in Finland, but the asset more or less is the same. To show you some of the projects, we have 17 projects going on in Castellum and there is 6 major projects going on in Kungsleden. The combined project portfolio is nearly coming up to SEK 10 billion, SEK 7.4 billion in Castellum and SEK 1.4 billion in Kungsleden. It's a really, really nice portfolio. And also, as you can see in the project portfolio coming from Castellum, it's a large proportion of governmental, the 2 largest ones in Malmö, more or less. You can see E.ON is public or governmental -- yes, more or less. And then Godsfinkan, of course, it is. Tenant base, it's amazing. So many tenants from so many different sectors. This shows top 10 tenants in Kungsleden. There is no single tenant that stands for more than 4% of the combined rental value. The combined company, the income has been stable and growing in both companies for many, many years and will continue. Lower to the right here, you can see the dividend from Castellum over the years, amazing. And this is something that's really key for us to maintain this continuous growth in dividend year after year. We are the leading company in that respect. And we will continue that to -- try to continue to keep that position going forward. Sustainability is key for us. We have Filip on board, who can ask specific questions afterwards, but this is key. And I think it will be more and more focused on this going forward from everybody. It's been focused within the company for many, many years. And as you know, in the sector, real estate sector, cost side is electricity. It's heating. It's water, maintenance. If you are a little bit more structured and you're focused on this, you can save a lot of money. And that has been the case in the sector for many, many years. Now it's focused from everybody, what we're doing and what we can do going forward. And we will, of course, try to become a zero company as well as some others. And that's the focus, to turn over a very clean company going forward. Every new construction is always certified. Otherwise, we don't start. And so everything new will be certified going forward, of course. Significant synergies. SEK 185 million from operational. Big company, big possibilities to be efficient, get better deals with everybody and so on. Also on financials, becoming attractive, more attractive company. Keep the ratings and the volume will attract -- be attractive. So I look forward to see the next time we do something on the market if you can even get better margins than last time. That's -- and then, of course, there are also synergies in the market position. The offering will become stronger. But it's hard to calculate on how much that is. We're also losing one of our biggest competitors. How much will that help us to not fight, to work together, to -- and we get rid of one competitor, and so that's important. And the offer will become better. The combined companies, SEK 85 billion in asset value, net asset value. You have it at the bottom right here, 765 buildings. It's a big company. Rental value of almost SEK 9 billion and lettable area of 5.8 million square meters. It's a huge company. It's a company that every -- delivering from every seller of ours, trying to sell us stuff we'll like to have as a customer. And we will use that volume to get the best deals in the market and become the strongest company. Growth target. I mentioned before, we have a target of growth by 10% annually. This is a tough, tough task, to grow the income by 10% yearly. Been focused for many years, and we have succeeded. And this deal with Kungsleden will help us to succeed for -- will take -- it will increase our figures for the next coming years. We'll never exceed the LTV of 50%. It's 38% today, as mentioned. Never below 2.0 in interest coverage ratio. It's 5.3 today, and it will remain just below 5 in the combined company. We'll continue to distribute 50% of the income to the shareholders as a dividend going forward and -- 4.7 to be exactly. And the LTV post combination is 42. I should mention that as well. The time line is here. We have gone through it. So I pass -- skip toward that. Pictures on me, good one, I would say; Biljana, magnificent; Ylva, fantastic. This is -- I'm not in the team, I'm just the Chairman. So Ylva and Biljana will form the team, the strong Nordic team. Together with the team from Kungsleden and with the team from Castellum. We will welcome them in and welcome all of Kungsleden in. And then we start working together and becoming the best and strongest company in the Nordics. Do you have any more pictures? This is just repeating. So we'll go to the Q&A session if we have any questions.

I hope so. Yes, there are a lot of questions coming in. Thank you so much, Rutger, for going through the presentation.

Thank you.

I will start reading some questions that we had got in our chat. So the first one looks like this. Do you see any risk of the acquisition not going through? And what happens if Castellum fails to obtain 90%?

Well, we're -- you never know. You never know. Our ambition is, of course, to reach 90% and then yes, go through. If we don't need -- reach 90%, we'll probably most likely prolong the acceptance period as the first step. And then we see what's happened after that. That's up to the Board to decide if we would like to go through with the deal. If we don't receive 90%, we haven't -- we don't have an answer on that. We have to wait and see. But we are the owner of -- we have 9.9%. So anyway, we'll be an owner, a part owner at least, of Kungsleden.

Yes. So the next question. What is Castellum's view on Kungsleden's current book asset values? Does Castellum consider the book value as fair? Or do you see the value upside potential near term due to yield compression?

Yes, the book values in Kungsleden is based on asset-to-asset valuation. It's not made by Kungsleden itself. It's made by external valuators. And they are cautious and precautious. And they do it house by house, property by property. And today, you have a premium on portfolios. So if you can buy 4 buildings in an area like -- what Kungsleden call cluster. And they're using that word a lot, cluster. And that's because they have a lot of clusters. So a group of properties in one area, a cluster. And that cluster is actually, as a group, worth a little bit more. So that creates a small -- in today's market, a small premium. So what I see, I think a portfolio like Kungsleden is worth a premium. And we pay like 7%, 8% premium if you back the bid down to the property portfolio. And I think that's quite -- it's not too much to get the volume because if you buy piece and piece, then you will probably have to pay a lot more. So I think if you have the possibility to buy a portfolio of SEK 40 billion, SEK 50 billion like this is, then you have an advantage to make there so you can get this portfolio. And then also with the synergies we get, we create, we can always pay a little premium because the synergies create value. So there is room for a small premium if there wasn't in the valuations. But we just assume that it looks like -- and then we do our own estimate. And it looks like the values are fair, and we trust the external valuation firm. So -- that they have done their job. And this is something you do frequently. So it's not the once-in-a-while job. You do it frequently.

Good. Next question. What is the plan with Entra?

The plan with Entra -- the plan was to buy Entra, the whole of Entra and so that we would have a position in Norway of SEK 60 billion. Now it's SEK 19 billion, and it's not too bad. It's not too bad. We have 31%. And another friend of ours, a competitor of ours, has 32% or something. So together, if we can just speak to each other and be helpful to Entra, we can support the company going forward. And that's the way we go for now. Long term, I don't know, but it's hard -- to now since we are 2 major owners, it's hard to do something else. We are happy about our position. And it gives us indirectly SEK 19 billion. It will soon be SEK 20 billion. They grew all the time. So that's a nice position in -- it's not 60, but it's 20. And it's better than 0. And it's hard also to buy piece by piece in the Norwegian market. That will be very tough to buy SEK 20 billion in Norway. And another thing I like with the position is that if we can just support and stand behind the management team through the Board in Entra so that they make the best, we get the economies of scale in that market also because the synergies between properties in Norway and Sweden, if we buy SEK 20 billion in Norway -- or not. They're not big. Financial-wise, they are but not in daily management. But in this portfolio, you have SEK 60 billion. So you have the economies of scale. So that's good. So it's not -- it's actually really good. I would like to instead of -- so now we can instead focus on trying to get a larger portfolio in Denmark and Finland. So -- because we are quite small in Copenhagen, and we are quite small in Helsinki. It's 5, 5.5 and 7, 7.5 in Helsinki. So I would like to enlarge this portfolio, so we get a stronger position there. So that's our focus now. Now we can kind of forget Norway for a while. We don't need to go there and see a single assets. If we get prospectus, we can send them to Entra.

Its ownership. All right. There's a lot of questions in the chat. So I will push it a little quicker.

One thing more about Entra. We can buy more shares, but we can only buy a few more because now with 31, we can't go above 1/3, 33.33, because then we have to bid for the company. So that's the rules in Norway. Some people -- some investors thought when we passed early that we needed to bid but that was a misunderstanding because the rules in Norway are slightly different. So 33.3, that's a maximum. So we're almost there.

We will stay before that.

Yes. Yes, we will not pass that limit.

All right. I have another question. Will you leave the Kungsleden debt outstanding? Or will you refinance the debt?

We will, over the coming years, refinance. That's how we can create the financial synergies because we borrow slightly cheaper. So in that way, we can save more, save SEK 100 million or maybe more, about SEK 100 million.

Yes. Are you looking to raise even more hybrid capital after the combination?

That's nothing on our agenda, but the hybrids are attractive. You get the equity at attractive levels. So if that market continue to be in the same situation as it is today, that's not unlikely. But today, we did issue the amount we needed to strengthen our balance sheet. We don't need to use the hybrid any more than that today. But you never know if -- and Kungsleden is probably not the last acquisition we make. I think you will see in the Nordic market a lot of M&A activity. And we will, of course, in the future, take -- try to be involved. Now we have to focus on Kungsleden, but I mean further down the line. And in a situation similar to this one, we will most, likely if it's a similar situation, use hybrids.

All right. Another -- a little bit longer question. Assuming the Kungsleden bid is successful, will Castellum remain active as a consolidator on the Nordic commercial space? Or would you be more focused on the organic growth potential, including development projects post the Kungsleden deal? If you want to continue to grow via larger M&A deals, what are other segments or geographical that you look -- what would you look for?

[indiscernible] we will -- we always try to grow organically. Growth with projects is the best way to grow. We get the best yield. Then adding on single assets nearby are -- strengthen our local positions. It's also always interesting. But they don't come up so often. So when they do, we'll try to use the opportunities. And then it's always a matter of price, if the price is right or if it's not. If it's not, we don't buy. So it depends. Sometimes, we have an advantage of being large. And sometimes, we have an advantage of being big in any area. So we are maybe the only one interested in a particular property. So we'll see. And then M&A, as I mentioned, we will be -- if there are opportunities, we will calculate and figure see if it's attractive. It should always be attractive for the shareholders, value creating and profit creating in every way. So...

Okay. Should we say that it's a trend in the business overall?

Looking for acquisitions, yes, it is. Going back to the last years now, it's been a trend definitely. And then going forward, I think every -- most of our competitors will become larger and larger by acquisitions and M&As. Going outside the Nordic, was that also a question?

Yes.

It's not on the agenda. We have so much more to do in the Nordics. As I mentioned, we have only SEK 5 billion in [ opening ]. That's a very small position. We love to grow there, lovely city. Same thing in Helsinki, SEK 7.5 billion. We'll have to grow in Helsinki. But the deals must be right. We're not -- there is always a lot of house, always a lot of properties for sale. And they are always expensive. So you have to find the situations where you can live with the expensive price. You can see an upside. So that's what we're always looking for.

All right. What is your view on the future of office and distance working? Will it affect the market, the corona, I think.

Absolutely. Yes. Absolutely. It has already -- and we did work a lot from home even before. I think in average, people work like 1 day a week, and now we will probably 1.5 or maybe 2. But you will still need an office. People go crazy, in my view, by working from home all the time. But the flexibility will be key for people or companies, who would like to attract the best teams, to give them the possibility to be flexible. But to sum up your business and to meet up in the office, I think is so key. But you don't need to meet up 5 days a week. But you need to meet frequently to experience ideas and promote -- to discuss and come up with deals. And if you don't meet people, you don't come up with the greatest ideas. And you will not create a new huge company from the kitchen table. I don't think so. You need colleagues. And you need to sit and discuss and...

Have you seen any effects on the rental levels or the vacancy rates or stuff like that?

No. We've seen some vacancies coming up because the company has been -- worry about where we're going. And when leases are terminated, then they wait, some smaller companies. But we have also seen the opposite, companies needing more space because they need to bring in everybody a few days a week. And they also need more space. and they're not fit for that. They -- normally, they are not everybody in the space at one time. But now when people are more, "I'm coming in on Tuesday," then everybody might come in. You become more flexible. And then you can't regulate that or, "You can't come in on Tuesday. It's only him or her." So you need space for everybody. You need to meet everybody. Sometimes, we can -- then you need space and you need more space. And you also have more creative space. That's a trend we have seen for many years. It's like you create your own co-working space within your company, within your space. So that's what we have seen for many years like.

What do you think about the demand for office space as in, for example, Stockholm, Gothenburg, Malmö? Is that...

That's a growing demand. It's a growing economy, and it's a growing demand. And I think it's -- I think we will also see some negative things about people working from home, depression, alcohol. I've heard a lot of problems with people who had the possibility to drink several times a week now in the midweek and having problem coming back to the office. So we will note that there has been some negative. And depression, we have heard a lot of. So you need to get out of the house, get to the office, meet your colleagues, which is often your friends.

Yes. Conclusion, the office space is still needed.

Definitely. And we have a strong economy. We have a lot of new companies coming out all the time. There's a super trend in Sweden and in the Nordics of new companies coming out. And they need new space, and they got the capital to rent and so on. So there is a huge, strong demand also. And we do have a positive letting. Don't forget that. Our actual fact figures are positive.

Very good. A totally different question. Might issuing D shares be a way of ensuring a high rating after the combination? D shares in Castellum should be a very attractive offer to the market. What do you think about that?

To the market but not for Castellum. It's too expensive. We can borrow at attractive levels. I can't argue that we should issue these shares. These shares are traded at 6%, 6.5% yield. We can -- then we can use hybrids. That's -- makes much more sense to a certain extent. There is limitation with hybrids. The rating authorities, Moody's and S&P and Fitch and Scope and so on, they don't allow you to have endlessly portion of hybrids. So there are certain limitations. But within those, we work -- rather work with hybrids or something else, much more -- it's too expensive for a company like Castellum.

Yes. Will this transaction change Castellum's strategy in any way?

Not really. Not really. Maybe -- not really. But maybe we'll focus a little bit more on Helsinki and Copenhagen now because we become so big in Sweden. So we don't -- we can always become larger. But we are really small in Helsinki and Copenhagen. So that's much because -- since Kungsleden only has properties in Sweden. So that's where we grow by this deal. Otherwise, financial targets, dividend targets, Nordic focus, everything stays put.

Good. Under what circumstances would emerge between Castellum and Corem makes sense?

They're quite similar, makes sense. But now we're focused on the Kungsleden deal. It's a huge deal for us. Lots of people now need to work together. We're going to create this joint team. Going forward, we never know. If it makes sense, why not? If it doesn't, then we shouldn't. If it's value creating, we shouldn't miss a deal. It doesn't matter what company it is. So we are open for discussion, but it's for the best of Castellum's shareholders always.

Okay. Thank you for this presentation. Here is my question. There are currently lots of worries about inflation. How do you see this treat affecting the commercial property sector and the profit margins of Castellum?

I think we need inflation. That's not a bad thing. And we don't need these super low interest rates either. We can do very well with slightly higher interest rates. But now we -- and they will increase if we get inflation, of course. But we're talking -- we haven't had any inflation more or less, but now we see some signs of it. I think stable inflation, 2%, 3%, that's healthy. We can live with slightly higher. We have an ICR of more than 5 and after this, 4.7. So we are super strong. With inflation, we get better value creation on our portfolio. So it makes actually lives easier. So values just come by itself if you inflate the rental levels. So inflation is -- sometimes you say inflation is the real estate owner's best friend because their loans just disappear over the years. Let's just go to your parents. If they bought a house back in the days, borrowed and they thought it was a lot of loan, the loan is gone, not through amortization necessarily but through inflation.

Okay. One of the last questions. Will Biljana Pehrsson join Castellum even if the deal falls through? If not, what is the backup solution for the CEO position?

If the deal doesn't go through, I'm sure she's loyal to Kungsleden. As sure as that's -- I'm sure. But the deal, we'll offer. If not, if not, we started a recruitment process in the spring. We just need to restart that and employ a new CEO and also a new CFO in that case. But I don't see that happen.

All right. There is still some minutes left for new questions to be written in the chat below. And don't forget, we have also the opportunity to ask questions for our CFO, Ulrika Danielsson and Filip Elland.

And also think about the CEO, we do now have announced that we have a new CEO coming in. And if this deal stretches out, takes longer than we thought, then we are -- then we do have a team on board. But we look forward to get Ylva and Biljana, of course. They've made a really, really good job in Kungsleden. Cleaned up and structured the company. It was a little bit of a mess a few years ago, in my view. And now it's structured nice. Good portfolio, good projects. Super control and cleaned up the financial, cleaned up the debt position.

We had some questions about the quality in the portfolio before. So can you say something about the quality?

There is a misunderstanding. Kungsleden has sold off a lot of less attractive assets over the years. And they have also refurbished a lot of assets over the years. Several of them are assets we were trying to buy ourselves, been competing with them. And they also added on a lot of nice buildings. So in some cases, they have really the top-notch buildings. So it adds Castellum portfolio of -- of course, as Castellum also has a few properties that are not -- we don't show them on pictures every day. But they're interesting because strong cash flows. But -- they don't look the best, but they might be super interesting in the future with the new developments so on and so -- that's why we keep them. Otherwise, we would have sold them because the market -- the transaction market is super strong. So if we want to get something sold, that's the easiest job today. So everything we own, we own it because we want to own it. We want to keep it because it's so easy to sell today. And that's the same situation with Kungsleden. They, of course, compare, sell it or keep it. And they are -- the reason they kept the properties they have is because they like the cash flows and they see the possibilities in them. But we will sell off, as we mentioned before, a tail of properties that doesn't really fit into the joint company. So we will -- we are working now on a sales process. And we just announced one sell-off this other day. So we're working on it.

Yes. So this looks like a good final question. Where will Castellum be in 5 years from now?

We'll be slightly larger. If we manage to achieve the goal we have with 10% annual growth, in 5 years, we will be more than 50% larger, so SEK 265 billion, growing by 50%. We will become a large company. But it's -- that's the way most every company will be. So it's -- but it's a scary thing almost. It's huge. But it's also a super stable company with so many tenants. So if something should be larger, then it's really commercial real estate companies or real estate companies in general. The larger you are, the most stable you are. You are into each and every sector. And if there is one little sector that are doing bad, it will be replaced by something that do better. So it's the same type that the product portfolio in each and every company changes over the time is also your tenant portfolio changes over the time. So we -- if we have Tesla today, we don't have -- there are so many brands going away and new brands coming in. New companies coming up, companies disappearing. But for us, it's just a new tenant.

Can you say something about logistics going forward in a longer term?

Yes. Now we have about 15% logistics. But we do have a lot of land, so we can be a lot. So we have a huge land bank. So if we can find tenants, we can build a lot. Several hundreds or thousands of square meters of logistics. It's a really strong sector at the moment. So we, of course, try to use and work in that market as long as it's that strong.

Will it stay strong for a longer time, do you think?

Logistics will -- it's here. Last mile, huge boxes, small boxes, last-mile delivery, just in time, normal. If you order something in the morning, you want before the evening. So the logistics in each and every city and market is becoming key. And you need hubs, big warehouses and smaller hubs. So I don't see that trend coming to an end. So rather accelerating, more and more solutions, more and more delivery, pickup in cars and mopeds and bicycles. And people are lazy. If they can get it to the door, they want it to the door.

So the demand for good logistics won't disappear.

No. Sometimes soon, you will have -- like now you have pizza delivery. Tomorrow, you will have like a cappuccino delivery because it's too hard to go down to the cappuccino...

We'll see where this ends.

But we deliver the cappuccino within the offices. So if you go to the office, you get a cappuccino.

Of course. Okay, that was all questions that we had for today. Thank you to everyone listening in.

Thank you. It was a nervous start because I lost my glasses, and I took a pair that didn't work at all. So I couldn't see a thing. So I saw some but just most of it from here.

I think most of our listeners also can read. So you will find this presentation afterwards at castellum.se, both the presentation and this video. So please visit our website. So I would say thank you to everyone that listening. And thank you to you, Rutger.

Thank you all and you can always text message. I mean as, I mean lastly, I don't answer the phone all the time, but I answer text messages. So send them in.

Perfect. Thank you.