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

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 Sarby Westman, who will comment and present the results for 2021. I'm [indiscernible] and I will moderate the Q&A session right after the presentations. But first, Rutger Arnhult, you have some pretty impressive numbers to present for us.

I do have. Thank you for listening. The results 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 delivered almost SEK 12 billion in result. So that's quite impressive, also given the tough markets we have had in the world and in Sweden in 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 -- or 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 1/3. So we today own 33.33% 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. And then as you know, we have a position in Denmark and Finland. We have in the air also done quite large acquisition in Helsinki. So 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, 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 experienced at the moment. Yesterday, driving into work for a very long time, first time, I experienced queues. So it took 10 minutes longer. And also when at lunch time, I had to queue for lunch. So that's good signs. So that is good. We also have a very, very strong real estate market. So the investment market is strong. It's the strongest ever, and then in every market. So 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 the overlap between the 2 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 possibilities -- possible synergies on the cost side, operational-wise and also financial-wise. But 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, 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. And then, 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 have done. In Finland, we did the Kielo acquisition that added on about SEK 4 billion to our portfolio. And in Norway, our indirect holding is about SEK 22 billion. And then -- so 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 a portion of Entra, 176 billion and a size of 6.3 million square meters, quite impressive number. I don't think there is any -- actually, any other company -- commercial company in the Nordics that are even near that number of square meters, actually. And then the portfolio, what has it become? It's still. It's still focused on office, 58% of the portfolio is office, you can see here on the graph. But then also, the most part of the public sector properties are, of course, office. We have a very, very small portion of retail. And then the more or less the rest is warehouse, logistics and light industry. So office, logistics -- warehouse and logistics, that's the main focus. 80% is today in Sweden, 13% is in Norway and then 3% and 4% 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. So we see what we can find there. Looking at tenant portfolio, it's a very, very well diversified one. The customer base is amazing. The largest tenant, ABB, stands for about 2% of the total. The all 10 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. And this also gives us a strong base for us to continue to work with the tenants and grow the tenants and create new projects with the tenants. So it gives us a very, very strong competitive position. And you can also, in this graph, see that the public sector is 23%. If we would have -- 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. The 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. But 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. So 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 our -- 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. So we'll see continued growth in rental levels, that's my best guess. And also due to quite low new construction levels. So we see positive rent negotiations and positive net letting. And as mentioned, we -- in the report, we have a net letting of SEK 162 million in the full year, strong last quarter with SEK 45 million in net leasing, which you can see here. What is also interesting with this net leasing is that you can see that it worked a little bit better in the regional, smaller regional citizens. 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 have worked from home in a larger extent in Stockholm and in New York and in London. Cities is where you are more depending on the public transportation than in other cities where you more or less take the bike of the car to work in a large extent. So maybe that's an analyze to dig into in the -- 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 to what it looks like in the overall country. So that's entering. Values uplift. Strong market. As you know, whenever we have sold anything or we 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 million a year -- SEK 2 billion a year. Last year was about SEK 400 billion. So amazing strong -- amazingly strong market. Going forward, my belief is that we'll see still the same kind of yield levels, but 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, 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%; this year, 4.9%. And bear in mind that we got 2.8% indexation. So -- and then 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. So 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 -- in the picture here, for example, the new headquarter for E.ON in Malmö. You can see a planned project we have actually done the land job in Stockholm to the left here, and then also another project in Malmö for the new, what is called, the Swedish National Courts Administration in Malmö. So 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 North building, now the court building or public building in and also a new logistic building down in Helsingborg. So it varies between office and logistics. And this is a major focus for us going forward. It gives us a slightly higher yields than compared with the buying buildings out in the market. So this adds better yield to the portfolio. It adds long leases, it adds modern buildings and it also buildings we know from inside out. We know what kind of materials that 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 square meters. 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. So 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 then, 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 8 of 10 of them are new construction and only 2 of them are reconstructions, but we work with both type of projects. So going over to sustainability. We once again achieved the best price of being the best in the sector in the Nordics. And 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, and we have already reduced our carbon emission by 77% since we started in 2007. So that's pretty amazing. We'll continue this work, and the ambition is to reach a level of 50 kilowatts per square meter in consumption and that's in line with these ambitions. We are in 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, and the ambition is to build 100. We managed to reach the level of 55 completed by last year. So we continue that work. And of course, also now with the Kungsleden portfolio on board, we will analyze all these buildings. Some are topnotch and some are not, and we put a large effort to improve these ones as soon as we can. So I turn over to Ylva to give a view on some of the financial figures here.

Thank you very much, Rutger. Yes. As you've heard, we delivered the best results 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 plus 4.9%. It's both unrealized and realized value changes. And it's mainly explained by lower yield requirements in the market, but also from project gains and gains from building rights. So 2021 has been a very strong year in the transaction market in the Nordics. As Rutger said, doubled volume in Sweden, SEK 400 billion, and a very huge interest from investors. So we have seen declining yields. And the average yield in the 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. And in the first -- sorry, in the fourth quarter, income from property management increased by 29% -- sorry, back one. Positive net letting landed as we have heard SEK 162 million, and 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%, and 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%. And we report our holdings in Entra as an associated company as of end of August this year -- sorry, last year. And reporting is based on Entra's latest published report, the Q4. And our share of profits in Entra is reported in our income statement, that you can see here, and corresponds to SEK 880 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 LTV, if we look at the net debt in relation to total assets of 39%. Our long-term asset value, the EPRA NRV increased by 17% to sek 251 due to positive value changes in the property portfolio and growing profit from property management. So in summary, we delivered strong results from all parts of our business and a strengthened financial position during the year. And I -- now I will hand over to you, Rutger, to present our outlook and the proposed dividend.

Yes. Thank you. Yes, so try to give you some kind of outlook. We don't give forecast, but we do have improved earnings capacity as you, of course, understand. Giving you the outcome of 2021 for the both companies shows that. Bear in mind that the line here with the associated companies will, of course, be larger next year. That's 1/3 of the Entra result. And 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. So that's something we will look forward to, to have a strong contribution from Entra on that line. And then, of course, this is the outcome. We will, of course, get this income indexed by quite a lot, 2.8% on average, I guess, more or less, all over 100% index in the contracts. And then renegotiations, I believe, will be positive on top of that. So hopefully, some increase there. And then we will work with the synergies on the cost side and both operational, central and operational and then also on the financials. As mentioned before, it will take some time before you can see this in the picture, but it will be there. So the takeaways is a 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, and we will look forward to a positive and strong contribution from the Entra earning. The market is stable. Each and every market, we feel is strong and stable. We also experienced a very, very strong transaction market. And going forward, I think that the 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. And I do believe that we will be able to increase the rental levels going forward. We will maintain our financial, or say it, discipline, so that we make sure that we will keep our ratings or 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. So I think we will be able to increase the profits going forward. We'll keep our focus on project development. Some of the projects will be completed over the next coming years that will also create both value, as we are also writing out in the report, but also cash flows, of course. And we will continue to focus on sustainability because it's good for us, good for the planet and good for our profits and the value creation going forward. So that's the main takeaways. And then 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%, and this is the 24th time in the row when Castellum increases their dividends. So that's something we are proud of, and we'll try -- do our best to continue to keep up this positive consecutive trend.

[Operator Instructions] We will start with the telephone conference. But 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. So that's, I guess, the most important single factor.

Okay. So let's start. I hand over with -- to telephone conference to see if we have questions live there.

[Operator Instructions] We have several questions coming in. The first one coming from Your line is open for Fredric Cyon at Carnegie.

Fredric 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?

Yes, 1.8% is, of course, not the level we could actually refinance ourselves on today, so we could do that slightly lower. But that's included with -- as you know, we secured some interest rates levels going forward. So it's swap costs and others. But 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. So there is a potential there. The market right now is quite turbulent. We've seen some yield spreads coming up slightly. So we don't know what it will be by the time we negotiate and replace this bonds and secured loans. So we'll see. But hopefully, we will be able to lower the average cost of debt a little bit going forward.

That's clear. And then my second question relates to Page 12 of the report, where we can see the property portfolio, and you also state the rental value for the overall portfolio on that page, but that's based on year-end 2021. So 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. And then thirdly, on the loan-to-value of the 39%. Do you consider it too high, too low or just about right?

I think it's just about right. Since 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. So there are some adjustments. So we need to stay at about 39%, 40% to be appreciated. So 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.

Okay. And then two more questions. One, it's quite technical, but rather simple. Your hybrid, the first coupon, when will that be paid? And I guess it's semiannual. So will there be 2 coupons paid in 2022 or just 1?

Technical question, Fredric. I don't know...

We can come back on that one.

Yes. I have to come back. I don't actually remember what was said in the prospectus there. Been a lot of things happening since then. We have to come back. We have to come back, sorry.

Yes. No worries. And then finally...

I hate to get questions I can't answer, but that one is tough, technical.

Yes. And I would try to give you a question that you can't answer, so that one clear to me. Final question on discount to NAV. 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 to -- if there is a discount. And with a strong balance sheet, that's an option, of course.

The next question is coming from Markus Henriksson at ABG.

I have a question first on net leasing. It states SEK 45 million in several places here in the report, but it's SEK 69 million if we isolate Q4 in that cumulative figure table. So just what is the net leasing in the quarter, to start off?

In the fourth quarter, the net leasing is SEK 45 million, if we look at the aggregated Kungsleden and Castellum for the full fourth quarter.

All right. If we exclude projects, I guess, we can't really see exactly since the cumulative figures table is based on Castellum before, and now it's the merged 2 companies, but it looks to me like it was quite negative, the net leasing, if we exclude projects. First, is that correct? And also second one, if we look then on the investment portfolio, it looks like it shows negative figures in Central West and Stockholm, so what do you see in those different submarkets in Q4 and what do you expect going forward?

Yes, Central, repeat the markets, Markus.

Central, West, Öresund and Stockholm.

Yes, that's more or less all the markets. But what we see is sometimes, we should bear in mind that sometimes we do projects when we do new construction for tenants that -- so we lift -- sometimes we lift tenants from present space to a new one -- from an old space to a new one. So that happens sometimes. So we empty one building and fill a new one. And then after that, we have to refurbish and make the left building more modern. So 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. So the acquisition of Kungsleden was very much appreciated by the organization in Malmö. Gothenburg continued 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 2 years, I would say, 2021, Stockholm has shown the weakest performance. And I think that is I think that has to do with a larger extent of working from home. I really noticed that in our group, it has been the Stockholm office that has been most empty. And it's been in Stockholm where the parking lots at the office building has been empty. If you take the car and go to shopping or Uppsala, the parking areas are much more filled with cars. So we have stayed home to a larger extent than in other cities. So I think we will see that probably bounce back. And you can also see in the market, the vacancy figures from the external parts here in the report that have seen a small uptick of the vacancies in Stockholm and also in Helsinki, maybe they experienced the same situation.

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? And 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 do foresee, it takes a 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 now, but the full year. Some financial contracts are, of course, fixed for a certain time period. We have to wait until they expire. So I would say, all in all, like in 18 months, we'll probably have the synergies we can get from cutting costs operational-wise and financial-wise more or less. And then there is another synergy, which we haven't put a figure on, but that's the competitive situation that we don't need to compete with a large competitor anymore. In some markets, that's important. So since we've done it 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. So that's also something -- hard to calculate on, but something that we definitely expect to come out from this.

And a question how the integration is going, it's going well in Malmö. How is it going in Uppsala, for example?

Yes, it's going well everywhere. So it's different. We have also, as you know, created a new region. So now Västerås and Uppsala is 1 region instead of Uppsala being a part of Stockholm. So now Stockholm is going to be standing alone and Uppsala together with Västerås. Västerås -- Kungsleden has a very, very strong position in Västerås, but they do have external property caretaking. So 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. And our man in [indiscernible] 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 amount from Kungsleden, and he's now starting to integrate that group. We're still working from 2 different offices. We do have several offices in -- smaller offices in Stockholm, due to the tough, tough commuting situation. But the main office is divided in 2. So that integration starts now -- it just started now. In Gothenburg, same, integrating the 2 and as in Malmö. So it's in full swing. And as we mentioned before, the summer vacation, everything will be in place. And from then on going forward, we'll probably see some cost savings. And then, of course, some of the cost savings are already here. Management, top management has become a slight to fewer Board. We do not have costs of 2 Boards, we don't produce 2 annual reports in the same -- 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. So it's a time line of 1 to 18 months, I would say.

Last question. You mentioned before that you had a few noncore assets. Have you divested all the one you wanted 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. There are some single properties in single cities, 2 properties in 1 city and so on. And that's not the way going forward. We sell those when we get a nice -- a good price for them. Maybe as a portfolio, maybe a single assets. And that will give a great room for further acquisitions in our more focused markets.

The next question is coming from Mr. [indiscernible] at Barclays.

It's Paul here from Barclays. Just a couple of questions from me. And I 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 the shares, pref shares for the 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 the other means of increasing equity leverage obviously come with a significantly higher cost than bank financing or bond financing? So I just wondered 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? And then I've got another question sort of tally to that afterwards.

For us, given the situation that we can borrow quite attractively, I believe that the preferred shares and shares is not going to be -- is not going to happen. We were very happy with being able to do the hybrid at [ 3.125% ]. At that point, that one has spread away now. So at the moment, it's not unattractive, but there is no need for us to do hybrid. The instrument is there. And there are some limitations in regards of rating, but we are not close to the limitation. So we could issue more hybrid within the framework of our rating. So I would say hybrid, going forward, that's a possible way, shares and preferred shares, no. Joint ventures is another way, like the ownership in Entra. We get to resolve, but we don't carry the balance sheet. Even though their balance sheet is very strong and their rating is very strong. But 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 has 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 want to be a part of a company instead of owning themselves and we can get them as local owners in portfolios like that. And Entra SEK 50 million or something in Copenhagen and Helsinki and we have 1/3 that's -- that would be SEK 20 million -- or SEK 20 billion or so for us, that would be a way to grow also. But 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 Halvor, with the town, and that's known one, actually. So that's the way going forward, not changing much. We maintained a strong LTV. And we have to have a few percents headroom there since -- compared with the Moody's. Moody's like to see 4% to 5% at the most the highest, and we need to have a few percent between what we report and what they do because they do this haircut on the assets.

Good. And 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 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 forwards? What is it you feel wasn't being done in the way that you would like it to be done? And do you feel will be accelerated or changed? Is it new acquisitions in new areas? Is it acceleration of the development pipeline? Is it acceleration of the disposals in noncore areas and focus on investments? Just trying to get trying to get a sense, I think there are so many questions we're receiving on our side is what is Castellum going to be in the next sort of 12 to 24 to 36 months relative to where it was previously?

Yes. I think you will not see much change in Castellum. There's some change -- the Kungsleden didn't have the same focus on -- they did have the focus, but they were not really there yet, but they were just about to become more energy efficient and so on. So 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 case, have a larger focus on project development. So we'll really go through and see what kind of possibilities there are in the Kungsleden portfolio, but we also look at other possibilities meanwhile, all the time. Just continued strong, maybe even stronger focus on project developments due to the tough acquisition market. So even more stronger -- 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 gals, who are renting out the empty square meters and then taking care of the tenants, and they're doing the job. And what we -- everybody else of us, we're trying to help them. So I'm trying to turn it upside down, the organization a little bit. So we are supporting the ground team. Maybe that's a new view, I don't know, maybe it is, but that's the way I view it. So we are 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. And that's the difference between Kungsleden and Castellum because we would like to have -- if there is a maintenance guy, coming out to tenants, it should be Castellum on the jacket and not some other company. And if the tenant has a view on something, we need to get that all the way into the organization and help out and respond to any requests. So maybe that's a difference. We try to be a small company.

Okay. So not looking to do any sort of major, major acquisitions, M&A deals.

No, no, no.

Yes. Probably that will continue elsewhere in the Norway?

No. We're always open for a major acquisition also, like Kungsleden. If there is one, you're not allowed to miss it if it's a good one and that would be very, very bad. But they don't come that often. But if they come like Kungsleden and Norrporten did a few years ago, then of course, we will do our best to take the opportunity to create something bigger and stronger. And 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. So the stronger we become, the better we can deliver, the better our offer is for the tenants. So the easier is to help them. So we can definitely become large in every market compared with today and save and do have benefit from it. But we need to be small, we need to be local and we need to -- we can't allow ourselves to consider ourselves as a gift from and so on. We must be there locally.

And then sorry, just a follow on, just something apologies, one last one. So in terms of sort of moving forward, you see Castellum as being sort of strong balance sheet, relatively low levered compared to peers from an equity leverage point of view, focus on growth, focus on total returns rather than necessarily focused on buying, say, high cash flow and financing that with the low cost of debt. Is that -- would that be how you'd sort of classify the future? So it's a focus on growth, focus on total returns, not necessarily just purely on a spread?

It's tough to buy high cash flows. I rarely see that. So -- but sometimes we managed to achieve it in new developments. So to try to create good cash flows in new developments, being smart 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, they're focused on those kinds 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 these are 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 will be nice. So 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. But that's pretty much the same as before, Nordic platform, stable finance, close to the tenants, focus on development, focus on sustainability, which is very profitable, if you do it, right?

We have a question coming from [indiscernible]

Latching on a bit to the last question regarding Helsinki and Copenhagen, are you looking for anything particular there? Was it just [indiscernible] in total?

We look for office and logistics and nothing else.

Nothing else. Okay. And the rest of Denmark and Finland, are there any cities that are of interest to you? Or is it just the capital region?

In Denmark [Foreign Language] they are too small, actually. It's a very small markets. If you go in there, you cannot go out, and it's the same in Finland. It's -- maybe focus on Helsinki. But then, 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, but we try to focus on Helsinki. Since we have a small volume, we would like to start with -- become larger in that -- the major markets we are in. So -- but then going forward, we might be able to, in Finland, be more than a one time, but -- in which we already are, but in Denmark, we try to -- I think we try to avoid it because other markets are so small compared with Copenhagen. Then it makes more sense to diversify to another country, actually, in my view. But 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 most likely to let you expand to first?

That's too early to say. We have to analyze that. But we follow it, and we've been following other markets for many years, but it's not on the table for the moment. But -- so if you find out something interesting for us, please come back.

I will...

We need management -- in that case, we need management on board because we would like to be local, and we are not local today. So 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 offset at 33% or are you still looking to acquire the entire company?

I think there is -- it's quite hard 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, then we have to go through that quite costly this session. 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. And 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 -- and discuss and give a view. So it works well. And in contrary to we don't own any other buildings in Norway and are not even looking after that either. So it's not on the schedule to buy anything on our own in Norway. We're happy with the position, and we're not competing with Entra in Norway. So instead, we look in Copenhagen and Helsinki. And if there is any project coming up in Norway, we send it to Sonja and Entra, so they can dig into it.

Great. The two last questions, more of Sweden. Your headquarters, will that -- now that you've merged with Kungsleden, will that be only in Stockholm or will you still have the Castellum headquarters in Gothenburg?

Both, 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. I used to have that as the CEO of Klövern we had the same with in Stockholm and worked really well. So we always kept the -- for example, we have salaries in bookkeeping and invoicing and all of that in we just let it be there.

And lastly, as Ylva leaves the company later this year, will you have a new Deputy CEO or you manage without?

I'll take over that role myself. It's great fun to do the bookkeeping and figures. So I don't know we're happy with that. No, actually, I'm joking. We announced that this morning, so it's out there. We announced -- yes, so we have already...

But -- yes. But will the new CFO also take the position as Deputy CEO?

No, no. Okay, okay. Sorry, sorry, sorry. She will not. She will not. She will not. Head of Treasury is Jens Andersson and he's here beside me, sitting here and drinking coffee in the room, talking with the banks all day, all night already. So Jens Andersson will be in charge of the debt and the treasury.

And no Deputy CEO?

No. No. No. And as you know this, Maria comes from Kungsleden. So she's been working with Ylva for how many years, is it?

It's 6 years.

Six years and used to be an accountant before. She's really a star, so she's superstar.

Thank you so much from the telephone conference. I think we need to stop you there. A lot of interesting questions from you. We still have some from -- on 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. And the first one I spot here is from Green Street, Peter Papadakos, and he's 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 can't change the portfolio and I doubt we will. We have considered it. We haven't decided yet, but I doubt we will. But hopefully, it will show up in the figures anyway with improving lowering cost per square meter and so on. So -- but I doubt we will report it. It will be too difficult. Some is very easy to report, but some is tough.

Yes. Then 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 or could you possibly share what the yield compression in the quarter was?

There are some yield compression in the portfolio, of course, and in a market. I don't have the exact figure. I don't know if you have, Ylva?

What's the question? How big the yield compression was in the quarter?

It looks like it's unchanged, but that's an effect of merging the two companies.

Yes.

But -- and I know that there are some yield compression, but I don't actually know the exact figure.

No. No. Not me.

We can come back. We can calculate on that. We -- of course, we do have it somewhere, we can figure that. We can give you that figure later.

I will share two more questions before we end this session. And one is from [indiscernible]. Can you compare the Stockholm and the Oslo office market differences and similarities?

Quite similar. You have these 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're quite similar. They're quite similar, I would say.

Okay. And then the last question that always comes up during these sessions, so let's take it one more time. It's both from [indiscernible]. So going forward, given the geographic overlaps and the importance of scale, would it be reasonable to assume a merger with Corem and when would that happen?

We're focusing now on the merger with Kungsleden. Going forward, you never know what we do. I got that question so many times regarding Corem and Klövern. Since we bought 10% in Klövern, 2008, I got that question every second month for so many years. They actually merged last year. Maybe we will in the future will 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. So the future will tell. So for now, we are competing full time, and that's maybe healthy also to compete between the companies.

And 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. And I do have some more detailed questions here that we can maybe get back to you on mail because we also dear your time, and we want to be pretty much on time anyway. So 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 do call us.

Thank you very much.

Thank you.

Bye-bye.