As you know, we have chosen to withdraw from the Entra deal since we could not secure sufficient ownership to realise the major synergy effects. This does not mean that Castellum is left without alternatives. Quite the contrary, after a number of other major transactions we have now created unique scope for action for the future. The two major transactions with Blackstone mean that we have realised a great deal of hidden value in our logistics portfolio. “Hidden” in this sense means that the price levels are 20% and 27% higher, respectively, than the valuation as of 30 September 2020.
The best is yet to come
More importantly, it should be emphasised that we will retain the most attractive and expansive parts of our logistics portfolio: Hisingen Logistics Park, Castellum Säve, and Brunna, located north of Stockholm, as well as a number of important locations in southern Sweden. Moreover, several business discussions for logistics establishments on municipal land are in progress. Currently, the value of the remaining property management portfolio in this segment is approximately SEK 11 billion, and the total investment plan for the next few years is just over SEK 10 billion. Moreover, a number of logistics properties for development in the Öresund region were recently added to this portfolio. Within a few years, our logistics portfolio should be just as extensive as it was prior to the divestments, but will be of a much more modern type. New negotiations are under way. Project investment in logistics is extremely profitable for those who can offer the market the flexible, climate-smart and automated solutions that are in demand.
Scope for action
After these transaction, our scope for action is broad. The loan-to-value ratio in early 2021 fell to approximately 37%, which indicates financial strength and low risk. Castellum will now continue to invest in the Nordic office and logistics market, with a stronger balance sheet than ever. This will take place through both acquisitions and new production of both offices and logistics.
Strong earnings in difficult times
In light of the coronavirus pandemic, we can state that to date, Castellum has managed this major challenge very well. The reasons for this are a healthy risk spread in the portfolio with many state agencies as tenants, a low loan-to-value ratio and strong financial muscle and, not least, devoted and competent employees who have exceeded our customers’ expectations in this crisis, which has been hard on everyone.
Some 99% of billing for the year has been collected. Just over 290 contracts with quarterly rent of MSEK 125 have been converted to monthly payments, and rent reductions in the form of discounts total MSEK 14, of which state support covers 50%. We had a very small number of bankruptcies, MSEK 9 (3), and limited rental losses of MSEK 19 (13).
Income from property management rose 7% to MSEK 3,380, or 12.35 per share, which can be considered very strong under the prevailing conditions. During the final quarter, the increase was 3%.
The trend for net lettings was unexpectedly positive during the final quarter of the year, where figures for lettings, notices of termination and bankruptcies were better than in the year-earlier period.
Net asset value increased from SEK 195 per share to SEK 214 per share over the year, at the same time as a dividend of SEK 6.50 per share was paid. The loan-to-value ratio increased to 44.2% (42.7) at year-end, but included SEK 2.8 billion in acquired Entra shares.
Castellum’s financial position after the Blackstone transactions is so strong that some form of extra transfer to the shareholders will be considered. In 2020, 170,203 own shares were repurchased at a value of MSEK 28, and in January 2021, 485,000 own shares were repurchased for an additional MSEK 99.7.
During the year, our sustainability initiatives also advanced, especially through the road maps to climate neutrality that were adopted and the large solar cell installations at locations such as Jollyroom’s new warehouse premises at Hisingen in Gothenburg.
Projects yield growth
We are seeing an exciting trend in the development portfolio over the next several years. Castellum has large, fully leased, ongoing projects that will produce a good yield starting next year. At the end of 2020, Castellum had major ongoing projects of SEK 4.7 billion, of which projects for SEK 3.7 billion were started during the year, with a remaining investment volume of SEK 3.1 billion. In addition, Castellum has a large pipeline that will entail additional investment volume.
2021 difficult to predict
The conditions for growth during the current year are somewhat different than usual. Major portfolio sales leading to gains in net asset value, will necessarily entail a temporary drop in income from property management. We feel that despite income from its own projects, the company may have a lag in growth during the year even if they are supplemented with acquisitions and repurchases of own shares. But it seems 2022 will be a year of growth; with that in sight, together with our strong financial position, we will not forego our ambitions regarding dividends even if growth in income from property management this year is mediocre.
Gothenburg, 15 February 2021