Successful divestment of Kaktus enables continued value-creating initiatives

The uncertainty surrounding the global economy, particularly following the onset of the trade war in early April, had little impact on the European property market during the first quarter. We observed a continued cautious recovery and increased transaction activity, mainly driven by improved credit conditions and lower interest rates. Overall, transaction volumes in the European market increased by 4.3 percent during the quarter compared with the same period last year.

At the same time, we can conclude that the conditions for increased activity in the property market continue to strengthen. The European Central Bank (ECB) cut its key interest rate by 0.25 percentage points in April to stimulate growth and, in its comments, paved the way for further cuts if needed. Similarly dovish signals are also being heard from other central banks in Europe. This comes at a time when inflation in both the Eurozone and the rest of Europe is stabilizing.

Lower interest rates and improved credit conditions point to a stronger property market ahead, as uncertainty surrounding the trade war and the outlook for the global economy subsides. There are also several factors indicating that relative interest in investing in Europe is increasing as uncertainty surrounding investments in other regions grows.

All of this means that, despite the prevailing uncertainty, I maintain a positive view of the market going forward.

Operating profit for the first quarter amounted to SEK -44 M (4), a decline compared with the same period last year, explained by lower market values of fund investments, lower transaction-based income, divestments within Principal Investments in the same period last year, and restructuring costs. Adjusting for these effects, profit for the quarter is in line with the previous year and supports the outcomes of our initiatives to increase efficiency and digitalise our operations.

Successful divestment of Kaktus Towers
In Principal Investments, our focus during the quarter remained on developing and completing existing projects for sale, while evaluating new potential investments, including development projects and further European aggregation mandates with capital partners. It is therefore satisfying that we have delivered on both of these strategies after the end of the period.

After hard and focused work, we are pleased to have reached an agreement to divest Kaktus Towers in central Copenhagen at attractive levels for both us as the seller and the buyer. Kaktus Towers is a spectacular and award-winning project that we are very proud of. The residential section of the building was fully let following its completion in September 2022 and has since recorded rental growth of 15 percent. This reflects the property's strong appeal.

On 1 May last week, we signed an agreement with Quantum — on behalf of a client — for the divestment of the asset. The transaction is based on an underlying property value of approximately SEK 2.1 Bn and is expected to contribute nearly SEK 260 M to operating profit after transaction costs. The transaction is expected to be completed during the second quarter.

The sale enables increased opportunities for new and attractive investments to grow assets under management and recurring income, in line with our strategy.

I would also like to mention the residential project Vega, which we announced at the end of April. The co-investment expands our existing project development operations in Copenhagen, building 269 affordable apartments in a joint venture with global property investor Barings. Vega is a clear example of our strategy within Principal Investments. Going forward, we aim to diversify the portfolio through the strategic use of own capital, co-investments, and partnerships — to grow assets under management, increase recurring income and long-term shareholder value.

With valuations having stabilised at a new level, we see a strong starting point for new investments, combined with a very strong cash position that is further strengthened by the divestment of Kaktus Towers.

Recovery in the transaction market
As previously mentioned, the Corporate Finance business area experienced a continued improvement in the transaction market during the first quarter, albeit to varying degrees across different markets. During the first quarter, we acted as advisor in a number of transactions, although slightly fewer than in the fourth quarter of 2024. This is partly explained by the fact that the first quarter historically is a relatively weak quarter for transactions.

While awaiting a real turnaround in the market, we continued during the first quarter to sharpen and adapt our organisation, which resulted in non-recurring costs of SEK 7 M. 

Balanced capital flows
In Investment Management we are pleased of a continued balance of in- and outflows.

Assets under management within Investment Management totalled SEK 148 Bn at the end of the quarter, a decrease of SEK 7 Bn compared with the end of 2024. However, adjusted for currency effects, this represents an increase of nearly SEK 2 Bn.

The capital inflow mainly stemmed from growth of new Asset Management mandates, where we are entrusted by investors to manage, reposition, and develop property portfolios.

The merger of our two fund management companies — Catella Residential Investment Management (CRIM) and Catella Real Estate AG (CREAG) — into Catella Investment Management GmbH (CIM) took effect during the first quarter. The benefits of the merger, aimed at leveraging synergies, became apparent immediately. During the period, CIM, with advisory support from the French group company Catella Aquila Investment Management France, acquired three logistics properties with a total lettable area of approximately 18,750 square metres in Saint-Étienne and Avignon. The investment was made within the framework of the investment fund Catella Logistik Deutschland Plus (CLD+), which closed at EUR 500 M, corresponding to approximately SEK 5.7 Bn, at the end of 2024. Catella Aquila Investment Management France will be responsible for the management and development of the properties.

Outlook
I remain deeply grateful for the trust the Board has placed in me to lead Catella as interim CEO and President, and I warmly welcome Rikke Lykke as the new CEO and President. Rikke will assume her position after summer on 15 August, I will continue in my role as interim CEO until then, with the ambition to further strengthen Catella as a leading pan-European property investment company, supported by a very strong financial position and a clear focus on capturing the opportunities offered by the current market situation.

Our focus going forward is to continue working in line with the strategies we have developed for our respective business areas.

Diversify and sharpen the investment focus of Principal Investments, which means that, as we divest existing development projects, we will make new investments using equity, in order to grow Investment Management’s assets under management and establish a solid foundation for recurring income. Here, the divestment of Kaktus Towers is a very important piece of the puzzle.

Enhanced profitability and a harmonized offering in Corporate Finance is achieved by strengthening and focusing our services during weaker market conditions, combined with cost-saving measures. It gives us a strong position in a market that is turning the corner.

Focus on AUM growth in Investment Management, where we continued to achieve growth during the past years of challenging market conditions, driven by a balanced approach between fund investments and our expertise in managing and developing properties through mandates. By continuing to expand existing funds and launch new strategies, we cultivate growing, stable, and value-creating cash flows.

I view the near future with optimism, despite the uncertainty in the global economy. Our strong position as a leading player in the markets in which we operate, combined with strong liquidity and a capital position that has been significantly strengthened through the divestment of Kaktus Towers. We have the strength to seize opportunities that arise in the market and are focused on growing assets under management, as well as making seed investments in funds or mandates.

Catella will be presenting the Interim Report and answering questions today at 10 a.m. CEST.
To participate in the conference, please see https://financialhearings.com/event/51907.

Daniel Gorosch, interim CEO and President
Stockholm, Sweden, 9 May 2025