Castellum - Swedish real estate mammoth (BUY - 300)

Castellum Aktiebolag is one of the largest listed real estate companies in Sweden. The value of the properties amounts to SEK 89.2 billion and mainly consists of premises for offices, warehouses / logistics and community properties with a lettable area of ​​4.2 million square meters.

Castellum operates through a decentralized organization with a strong local presence in some 20 cities in Sweden as well as in Copenhagen and Helsinki. In 2018, Castellum was awarded several awards for its sustainability work, including GRESB's Global Sector Leader, which means that Castellum is ranked as one of the world in the office and logistics premises sector and gold level for the company's sustainability reporting from EPRA (European Public Real Estate Association).

Castellum is also the only Nordic real estate and construction company selected in the Dow Jones Sustainability Index (DJSI), which includes the companies in the world that perform best in the area of ​​sustainability. The Castellum share is listed on the Nasdaq Stockholm Large Cap.  Every day, about 250,000 people go to work in Castellum's premises.

Castellum was formed in the wake of the property crisis in Sweden in the early 1990s. Large property portfolios were then taken over by the nationalized banks Nordbanken and Gota Bank in the form of mortgages for bad loans.

The state organized mortgage companies Retriva and Securum to handle acquired assets and large parts were taken over by two newly formed real estate groups, Castellum AB and AB Kungsleden.

A simplified description of the division is that better properties in good locations were gathered in Castellum while the more complicated stock was added to Kungsleden.

Castellum was organized into local subsidiaries, two of which were originally sold. The stock exchange language with properties in Stockholm's inner city was sold to municipal Swedish Housing.

The real estate company Norrporten, based in Sundsvall and a portfolio of Norrlandian properties, was lifted out of Castellum and listed on the stock exchange in 1994 but disappeared from the stock exchange when the Second AP Fund and the Sixth AP Fund acquired the entire company in 2001.

On June 15, 2016, Castellum acquired the Norrporten again is part of Castellum. Castellum was listed on the stock exchange in 1997 and the total property value was around SEK 10 billion.

Castellum historical share price

Castellum and other real-estate stocks have benefited greatly from the low-interest environment in Sweden, and had a slight dip along with the overall broader market index OMXS30 during 2017, as amortization requirements imposed by the Swedish Financial Authority lead to a chilling effect on the housing index.


Since housing is a lagging indicator, it took a subsequent 6 months before its effects were felt on the broader stock market. Despite the enforced amortization requirements, and the ensuing toughening of the requirements, by the 1th of March 2018 by the SFA, the real-estate market has continued to deliver a strong performance, albeit at a much slower pace compared to the period running up to the establishment of the requirements.

The SFA took action in establishing the amortization requirements as a response to reduce systemic risk from the housing sector. 

Hourly wages have been consistently rising making debt-servicing and amortization costs a non-issue, further underpinning the strong continued growth in the housing sector in Sweden.

Overall we find the real-estate sector to be particularly attractive as it has outperformed the OMXS30 by a few percentage points YTD.

East Invest is heavily biased for additional upside in the Swedish real estate sector and would therefore give Castellum a BUY, with a target price of 300 SEK until Q2 of 2020.