Strategic risks

Strategic risks are risks associated with Castellum’s reputation or the ownership of Castellum’s asset portfolio, which in turn can be divided into risks regarding the composition of the portfolio, reputation, digitalisation, investments and corporate acquisitions as well as changes in property values.

Sensitivity analysis — cash flow

Effect on income, next 12 months


Effect on income, MSEK


Probable scenario



+/– 1 ppt





Rental level/Index


+60 / –60






+66 / –66




Property costs


–16 / +16




Interest costs1)


–165 / 118





Due to such factors as the interest rate floor in credit agreements, Castellum is not able to take full advantage of negative interest rates, which reduced the positive effect on the cash flow when the interest rate drops one percentage point.

Sensitivity analysis — change in value












Change in value, MSEK











LTV ratio











Sensitivity analysis – cash flow

Figures in green relate to change in value













5. Composition of the asset portfolio
The composition of the asset portfolio can be affected at two levels: unfavourable geographical distribution (Castellum owns properties in the wrong sub-market, community or location with regard to factors such as future growth and current strong urbanisation trend) or that Castellum owns obsolete properties – a property portfolio that is not future-proof based on customer preferences, climate changes, technical requirements, micro-location or flexibility in usage and contractual terms and conditions.


  • Macro analysis: regular reviews of the sub-markets’ conditions as regards economic growth, rental market, partnership climate, infrastructure investments and so on.
  • Annual review of the asset portfolio regarding both geographic exposure and product types.
  • Strategy documents established annually by the Board of Directors.
  • Monitor climate risks in the asset portfolio, and analysis of climate risks in conjunction with investment decisions.


Castellum’s portfolio is located in 14 cities around Sweden, as well as Helsinki and Copenhagen. Currently, all locations are assessed as having the right conditions for continued holding or investments.
Additionally, major transactions have been carried out over the last few years for the purpose of creating better conditions for growth in the cash flow going forward.
The Group’s asset portfolio in the commercial property segment is divided into offices, public sector properties, and warehouse and logistics. All segments are linked to growth possibilities.








6. Obsolete product/property
A property portfolio that is not futureproof may become obsolete due to customer preferences, climate change, technical requirements, micro-location or to flexibility in usage and contractual terms and conditions. It entails a risk of increased vacancies and a decline in value as a result, or alternately large investment commitments.


  • Monitor the rental market and its trends/offering.
  • “Trendspotting”
  • Be customer-centric, to understand not only the needs of today but also those of tomorrow.
  • Monitor infrastructure investments.
  • Participate actively in city/sub-market development.
  • Innovation efforts (an innovation lab) that follows technological developments, focusing on megatrends.
  • Routinely invest in the existing portfolio to “upgrade” and sell properties that are not deemed “right” going forward.
  • Monitor climate crises


Castellum annually invests approximately SEK 5 billion, net, evenly distributed in a normal year between acquisitions and new construction, extensions and reconstructions.
Castellum also actively works on sales in order to reallocate capital to investment opportunities with better yields.








7. Size – too big in a submarket/area
Becoming too big in a sub-market or city may result in the municipality or the business environment placing stricter demands on Castellum, for example requiring the company to take overall financial responsibility for an area regarding infrastructure and so on.


  • Be among the top three property owners in each respective city.
  • Monitor market share, which is taken into account in the investment strategy established.
  • Conduct annual analysis of the coming three-year period to identify available growth opportunities.


The property portfolio is concentrated in selected cities, all of which are regarded as stable with favourable conditions for long-term positive development.








8. Brand
Insufficient preparation for managing sensitive issues, discontent and/or crisis risks triggering a crisis, creating rumours and damaging confidence as a result.


  • Open culture for creating the confidence to pass on information regarding any problematic state of affairs at an early stage.
  • Monitoring in traditional and social media.


  • Misdirected campaign that creates shock and upset risks ruining our reputation and confidence among tenants, employees and other target groups.








9. Digitalisation
Trends in digitalisation move quickly, creating new conditions for the property industry. New digital or innovative solutions replace old technology and working methods, making new service possible and changing tenant demands. These trends also mean that new players enter the market. Players who do not adapt their operations to changing conditions could lose customers, suppliers and employees.


  • Business intelligence with a focus on megatrends and their impact on changing behaviours in operations and people.
  • Innovation initiatives/lab that promote business development.
  • Connected technology in properties to gather data and learn from it.
  • Acquisition of United Spaces, a co-working company, in January 2019.


  • Risk of inefficient working methods and/or lost tenants and employees if innovation, new technology, digitalisation and efficiency enhancements are not utilised.
  • Risk that new players take over parts of Castellum’s business, including tenant contact.








10. Investments
Erroneous investment strategy or alternately inability to execute the selected investment strategy, or inability to identify profitable investment projects.
Investments can be in the form of new construction, extensions and reconstructions, or via acquisitions. Acquisitions of individual properties can be carried out directly as property acquisitions, or indirectly in corporate wrappers.
Acquisitions can also be large-scale, either in the form of regional portfolios or property categories, or in the form of strategic corporate acquisitions (i.e. the purchase of an existing organisation).


  • Annual review and evaluation of the chosen investment strategy.
  • Investment decisions linked to the chosen invest- ment strategy to ensure the correct decision.
  • Several investment discussions in parallel.
  • Three-year follow-up of investments made.
  • Risk-based model to determine the share of developments that can start without tenants.
  • Structured decision-making process that analyses market conditions and risks.
  • Contract forms that limit risk
  • Leases signed prior to the production start are designed to limit the negative impact of unforeseen production delays, additional requirements, and so on.
  • Quality assurance and monitoring of completed projects.
  • Quality assured due diligence process regarding legal, financial and tax issues.
  • Introduction programme for new employees.


Investments with low yield and/or lack of growth potential mean that the growth target of 10% in income from property management is not reached. Additionally, the growth target requires making annual investments, which in a powerfully competitive property market entails increased risk that the chosen investment strategy cannot be carried out.
Risks associated with new construction, extensions and reconstructions relate to both the technological side in the form of production risks such as choice of supplier, form of contract, technical design and so on; and to the market side in the form of lease and vacancy risks as well as misjudgements regarding potential rental level and customer desires.
In addition, there are risks in the form of negative environmental impact and climate crises.
Acquisitions via corporations also involve company-specific risks in the acquired companies – tax, disputes and environmental issues, for example. Takeover of personnel further entails employee integration.








11. Strategic corporate acquisitions
Strategic acquisitions can be carried out to obtain various advantages, but can also entail risks such as difficulties integrating operations and employees, drawing management’s attention away from other important business issues, a possibly new market the acquirer has limited or no experience with, expenditures for unknown or potential legal liabilities in the acquired company, and an overly expensive acquisition.


  • Due diligence.
  • Thorough planning and structured processes for incorporating a new company.
  • Identify in advance the skills and market awareness needed.
  • Identify key people in advance.
  • Access to the market’s best advisers.


Castellum has the efficient processes and skills (directly or indirectly via advisers) required for major strategic acquisitions.








12. Changes in value – property
Changes in value can occur either as a result of macroeconomic factors (see section on macroeconomic risks), microeconomic factors (usually the wrong sub-market, city or location) or property-specific causes (often cash flow-related). In addition, there is also the risk of individual properties being incorrectly appraised. Whatever the reason, changes in value impact the income statement, the financial position and the loan-to-value ratio.


  • Strong balance sheet.
  • A large number of properties, a geographically diversified property portfolio and great variation in lease agreements result in lower volatility in asset portfolio value.
  • Routine analysis of the transaction market and quarterly reviews of the asset portfolio valuation yield early warning signs.
  • Internal quality assurance and internal control of internal valuations.
  • Annual external valuation of at least 50% of the portfolio.


Large negative changes in value can ultimately lead to agreed terms and commitments in credit agreements being broken, thus resulting in costlier borrowing, or in the worst-case scenario credits falling due for payment.






Reduced focus on risk area since previous year





Unchanged focus on risk area since previous year





Increased focus on risk area since previous year