Castellum (CAST) Investor Update summary

Strategic focus and portfolio management

• New 'Back to Basics' strategy emphasizes profitability and capital allocation, targeting at least a 10% return on equity over the business cycle.

• Core operations will center on commercial real estate in Sweden, with flexibility to adjust holdings in Finland, Denmark, and Norway based on return potential.

• Increased transaction pace and asset rotation are planned to optimize returns and sharpen operational focus, with no set targets for asset class or geography.

• Decentralized property and asset management will be reinstated, shifting more responsibility to regional teams and enforcing strict cost discipline.

• Continuous improvement initiatives include enhanced education and cost awareness, with SEK 50 million in head office cost savings expected next year.

Capital allocation and financial policy

• All investments must meet a minimum ROE of 10%, and capital allocation will be strictly prioritized for shareholder value.

• New capital distribution policy allows for at least 25% of property management income to be returned to shareholders via dividends or share buybacks, as decided by the board and subject to financial position.

• Financial targets remain: LTV below 40%, ICR above 3x, and a commitment to maintain investment grade rating is now formalized in policy.

• Amendments to EMTN bond terms are proposed to facilitate asset rotation, including a fee for bondholder consent and a coupon step-up if downgraded to sub-investment grade.

Asset rotation and project evaluation

• Asset sales will be driven by return optimization, not solely to fund share buybacks.

• Both high- and low-yielding properties may be retained or sold based on total return outlook, not just yield.

• Speculative projects must meet or exceed portfolio return targets due to higher risk, with a likely reduction in such projects going forward.