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Entra
Quarterly Report • Jul 10, 2020
3596_rns_2020-07-10_1ea1ce2f-7398-4c14-9911-f03ecce41467.pdf
Quarterly Report
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Highlights
2 Entra second quarter 2020
- Limited effects from Covid-19 on operations and financials in the quarter
- Rental income of 587 million (580 million)
- Net income from property management of 350 million (352 million)
- Net value changes of 591 million (453 million)
- Profit before tax of 940 million (937 million)
- Net letting of 14 million
- Started two new refurbishment projects
- Semi-annual dividend for 1H 2020 of 2.40 per share (2.30 per share)
Rental income
7 mill.
Property management
- 2 mill.
EPRA NAV
- 7 %
Key figures
| All amounts in NOK million | Q2-20 | Q2-19 | YTD Q2-20 | YTD Q2-19 | 2019 | 2018 | 2017 |
|---|---|---|---|---|---|---|---|
| Rental income | 587 | 580 | 1 174 | 1 165 | 2 338 | 2 243 | 2 075 |
| Change period-on-period | 1 % | 4 % | 1 % | 6 % | 4 % | 8 % | 9 % |
| Net operating income | 522 | 530 | 1 066 | 1 072 | 2 149 | 2 058 | 1 913 |
| Change period-on-period | -2 % | 3 % | -1 % | 5 % | 4 % | 8 % | 10 % |
| Net income from property management1) | 350 | 352 | 706 | 727 | 1 471 | 1 434 | 1 259 |
| Change period-on-period | -1 % | -3 % | -3 % | 2 % | 3 % | 14 % | 18 % |
| Profit before tax | 940 | 937 | 997 | 1 795 | 3 735 | 3 073 | 5 030 |
| Change period-on-period | 0 % | 11 % | -44 % | 6 % | 22 % | -39 % | 52 % |
| Profit after tax | 730 | 763 | 782 | 1 471 | 3 225 | 2 735 | 4 514 |
| Change period-on-period | -4 % | 10 % | -47 % | 3 % | 18 % | -39 % | 66 % |
| Market value of the property portfolio1) | 50 610 | 47 312 | 50 610 | 47 312 | 48 964 | 45 630 | 40 036 |
| Net nominal interest bearing debt1) | 20 433 | 19 228 | 20 433 | 19 228 | 19 585 | 18 941 | 17 852 |
| Loan to value1) | 40.6 % | 40.8 % | 40.6 % | 40.8% | 40.2 % | 41.3 % | 43.3 % |
| Interest coverage ratio1) | 3.3 | 3.3 | 3.2 | 3.4 | 3.3 | 3.6 | 3.0 |
| Average outstanding shares (million) | 182.1 | 182.5 | 182.1 | 182.6 | 182.4 | 183.6 | 183.7 |
| All amounts in NOK per share | Q2-20 | Q2-19 | YTD Q2-20 | YTD Q2-19 | 2019 | 2018 | 2017 |
| EPRA NRV1) | 161 | 150 | 161 | 150 | 156 | 146 | 132 |
| Change period-on-period | 7 % | N/A | 7% | N/A | 7% | 10% | 24% |
| EPRA NAV1) | 156 | 145 | 156 | 145 | 151 | 141 | 127 |
| Change period-on-period | 7 % | 7 % | 7% | 7% | 7 % | 11 % | 26 % |
| EPRA NNNAV1) | 143 | 135 | 143 | 135 | 141 | 131 | 118 |
| Change period-on-period | 6 % | 7 % | 6% | 7% | 9 % | 11 % | 26 % |
| EPRA Earnings1) | 1.38 | 1.39 | 2.95 | 2.85 | 5.81 | 5.59 | 5.23 |
| Change period-on-period | -1 % | -5 % | 3 % | 1 % | 4 % | 7 % | 22 % |
| Cash earnings1) | 1.88 | 1.91 | 3.83 | 3.95 | 8.01 | 7.74 | 6.81 |
| Change period-on-period | -1 % | -3 % | -3% | 2% | 3 % | 14 % | 17 % |
| Dividend per share2) | 2.40 | 2.30 | 2.40 | 2.30 | 4.70 | 4.50 | 4.10 |
| Change period-on-period | 4 % | 5 % | 4 % | 5 % | 4 % | 10 % | 19 % |
Reference
1) Refer to section "Alternative performance measures" for calculation of the key figure
2) Entra pays semi-annual dividends. Dividend for 2019 of 4.70 per share constitute dividend of 2.30 for the first half 2019 and dividend of 2.40 for the second half of 2019. Dividend year to date Q2-20 relates to approved, not yet paid dividend.
Financial developments
Results
Rental income
Rental income was up 1 per cent from 580 million in Q2 2019 to 587 million in Q2 2020 and 1 per cent from 1,165 million to 1,174 million for the first six months of 2020. Despite significant contribution from finalised projects, the top line growth is currently relatively flat as several of Entra's large assets has been vacated and prepared for redevelopment over the last 12 months. The underlying changes in rental income can be explained by the factors in the below income bridge.
| All amounts in NOK million | Q2-19 Q2-20 |
YTD Q2-19 YTD Q2-20 |
|---|---|---|
| Rental income previous period | 580 | 1 165 |
| Development projects | 1 | 7 |
| Acquisitions | 7 | 14 |
| Divestments | -8 | -17 |
| Other | 4 | -10 |
| Like-for-like growth | 4 | 15 |
| Rental income | 587 | 1 174 |
Net positive contribution from development projects was 1 million in the quarter compared to the same quarter last year. During the last 12 months Entra has finalised the redevelopment of Tullinkvartalet and the three new-build projects of Powerhouse Brattørkaia, Brattørkaia 12 and Holtermanns veg 1-13 in Trondheim. However, during the year the properties Tordenskjolds gate 12, Schweigaards gate 15 and parts of Stenersgata 1 have been vacated and are awaiting redevelopment.
The acquisition of Møllendalsveien 6-8 in Bergen in December 2019 contributed with 7 million per quarter compared to last year, whereas divestment of five properties in Oslo during 2019 has reduced the rental income by 8 million per quarter.
Other effects in the quarter includes a reduction in turnover based rents due to Covid-19. The first six months of 2019 includes extraordinary lease buy-out of 12 million.
Compared to last year, rental income has been positively affected by an underlying like-for-like growth of 0.7 per cent (4 million) for the quarter and 1.5 per cent (15 million) for the first six months. The annual indexation of the lease contracts constituted 1.6 per cent. Near all of Entra's lease contracts are 100 per cent linked to positive changes in CPI. The annual adjustment is mostly made on a November to November basis.
Average 12 months rolling rent per square meter was 2,149 (2,013) as of 30.06.20. The increase mainly stems from properties vacated during the year awaiting redevelopment that have been reclassified to the project portfolio in 2020.
Compared to the same quarter last year, the occupancy rate went up by 160 basis points to 97.6 per cent. The market rental income of vacant space as of 30.06.20 was approximately 58 million on an annualised basis.
QUARTERLY NET LETTING
Gross letting, including re-negotiated contracts, was 95 million in the quarter of which 3 million is attributable to letting in the project portfolio. Lease contracts with an annual lease of 38 million were terminated in the quarter. Net letting defined as new lease contracts plus lease-up on renegotiated contracts
less terminated contracts came in at 14 million (29 million) in the quarter. The timing difference between net letting in the management portfolio in the quarter and its effect on the
financial results is normally 6-12 months, while new contracts signed in the project portfolio tend to have a later impact on the results.
The graph above shows the estimated development of contracted rental income based on all reported events, including income effect from divestments and acquisitions, development projects, net letting based on new and terminated contracts in the management portfolio, and other effects such as estimated CPI adjustments. It does not reflect any letting targets on the vacant areas in the portfolio or on contracts that will expire, but where the outcome of any renegotiation process is not known, i.e. not yet reported in "Net letting". The graph therefore does not constitute a forecast, but rather aims to demonstrate the rental income trend in the existing contract portfolio on the balance sheet date based on all reported events.
Operating costs
| All amounts in NOK million |
Q2-20 | Q2-19 | YTD Q2-20 |
YTD Q2-19 |
|---|---|---|---|---|
| Maintenance Tax, leasehold, |
7 | 9 | 12 | 15 |
| insurance Letting and prop. adm. |
17 27 |
16 11 |
29 43 |
30 25 |
| Direct property costs | 13 | 13 | 24 | 23 |
| Operating costs | 65 | 50 | 108 | 93 |
The 16 million increase in letting and property administration costs from the second quarter of 2019 is mainly related to an increase in expected credit losses on trade receivables due to Covid-19, including increased uncertainty on the collectability of older receivables.
Net operating income
As a consequence of the effects explained above, net operating income came in at 522 million (530 million) in the quarter and 1,066 million (1,072 million) for the first six months of 2020.
Other revenue and other costs
Other revenues were 20 million (71 million) in the quarter and 38 million (140 million) for the first six months of 2020. Other costs were 14 million (67 million) in the quarter and 23 million (128 million) for the first six months of 2020.
Other revenue and other costs in the quarter and the first six months of 2020 mainly consists of income and costs related to inventory properties (properties in the Bryn portfolio which is expected to be zoned for residential development and subsequently sold to a third party) and from extra services provided to tenants.
In the first six months of 2019, 95 million of other revenue and 87 million of other costs were related to the development of Tollbugata 1A in Oslo, which was forward-sold and delivered to the buyer in the fourth quarter of 2019.
Administrative costs
Administrative costs amounted to 39 million (42 million) in the quarter and 89 million (90 million) for the first six months of 2020. The decrease in the second quarter of 2020 is primarily related to lower activity due to Covid-19.
Share of profit from associates and JVs
| All amounts in NOK million |
Q2-20 | Q2-19 | YTD Q2-20 |
YTD Q2-19 |
|---|---|---|---|---|
| Income from property management |
1 | -1 | 2 | 2 |
| Other income and costs |
0 | 133 | 38 | 153 |
| Share of profit from associates and JVs |
1 | 132 | 39 | 155 |
Other income and costs from associates and JVs in the quarter mainly relates to the gains from the completion and delivery of residential apartments and commercial assets, offset by an impairment charge for one of the residential development properties in Bjørvika. For a detailed breakdown of the results from associates and JVs, see the section Partly owned companies.
Net realised financials
| All amounts in NOK million |
Q2-20 | Q2-19 | YTD Q2-20 |
YTD Q2-19 |
|---|---|---|---|---|
| Interest and other finance income |
2 | 3 | 5 | 5 |
| Interest and other finance expense |
-142 | -142 | -293 | -276 |
| Net realised financials | -141 | -139 | -288 | -271 |
Net realised financials have increased in the first half of 2020 compared to 2019 mainly due to higher interest bearing debt and higher average Nibor interest rates on floating rate debt in the first six months of 2020.
Net income and net income from property management
Net income came in at 349 million (484 million) in the quarter and 744 million (880 million) for the first six months of 2020. Net income from property management was 350 million (352 million) in the quarter and 706 million (727 million) in the first half of 2020. This represents a decrease of 1 per cent from the second quarter in 2019 and 3 per cent from the first six months of 2019. For calculation of Net income from property management, see the section Alternative performance measures.
NET INCOME FROM PROPERTY MANAGEMENT PER SHARE
(Annualised, rolling 4 quarters)
Value changes
Due to the very high uncertainty stemming from the Covid-19 pandemic and the sudden decline in oil prices in the latter part of March, Entra's external appraisers performed the valuation as of 31.03.20 based on the market conditions without estimating the potential effects the pandemic and oil price decline. As a consequence of the material valuation uncertainty at the end of the first quarter, Entra chose to base the fair value as of 31.03.20 on the valuations obtained as of 31.12.19.
The recent months have given the external appraisers more clarity about the impact of the slowdown in the economic activity, and the effects of Covid-19 and the oil price development are reflected in the values obtained as of 30.06.20. As such, the changes in value of investment properties for the second quarter equals the value change for the first six months of 2020.
The valuation of the property portfolio resulted in a net positive value change of 619 million (472 million) in the quarter. About 219 million of the total value changes is attributable to increased market rent, primarily in the central parts of Oslo, and about 98 million is a net result of new contracts partly offset by effects from terminated contracts. In the project portfolio, about 33 million relates to ongoing projects, mainly explained by new lease contracts signed in the period and reduced risk as each project is moving towards completion. The net effect of yield changes are negligible in the quarter, and the remaining stems from positive value changes of 181 million in relation to that Entra made a settlement regarding a tenant's purchase option of one of the assets and positive effects of 87 million related to other property related changes.
Net changes in value of financial instruments was -28 million (-19 million) in the quarter and -365 million (-41 million) for the first six months of 2020. The negative value change in 2020 is mainly due to a sharp reduction in market interest rates, which with a weighted average interest rate duration of 2.5 years on the debt portfolio, implies a net liability increase on interest rate derivatives of 365 million.
Tax
Tax payable of 10 million (6 million) year to date is related to the partly owned entity Papirbredden in Drammen. The change in deferred tax was -204 million (-171 million) in the quarter and -206 million (-318 million) in the first half of 2020.
The Group, except for certain partly owned companies with marginal tax effect, is currently not in a tax payable position due to tax loss carry forward. At year-end 2019, the tax loss carry forward for the Group's wholly-owned subsidiaries was 68 million (321 million).
Profit
Profit before tax was 940 million (937 million) in the quarter and 997 million (1,795 million) for the first six months of 2020. Profit after tax was 730 million (763 million) in the quarter and 782 million (1,471 million) year to date 2020, which also equals the comprehensive income for the period.
EPRA Earnings
EPRA Earnings amounted to 251 million (254 million) in the second quarter and 537 million (520 million) year to date 2020. Refer to pages 27-28 for further details.
Balance sheet
The Group's assets amounted to 53,109 million (49,452 million) as at 30.06.20. Of this, investment properties amounted to 50,736 million (46,660 million).
Inventory properties of 416 million (412 million) at the end of the quarter relates to the properties in the Bryn portfolio expected to be zoned for residential development and subsequently sold to a third party.
Other receivables and other current assets was 390 million (724 million) at the end of the quarter. The 2019 amount included contract assets related to the forward-sold asset Tollbugata 1A, which was delivered to the buyer in the fourth quarter of 2019.
Other non-current liabilities was 499 million (687 million) at the end of the quarter. The decrease is mainly related to the derecognition of a provision for the contract obligation assumed from the University of Oslo for the remaining lease period at St. Olavs plass 5, following the acquisition of the property in the fourth quarter of 2019.
Book equity totalled 24,842 million (23,252 million). Equity per share was 156 (145) based on the EPRA NAV standard, 143 (135) based on EPRA NNNAV and 161 (150) based on EPRA NRV. Refer to pages 29 and 30 for further details.
Cash flow statement
Net cash flow from operating activities came in at 191 million (192 million) in the quarter and 676 million (622 million) for the first six months of 2020. The increase in the first half of 2020 mainly relates to working capital movements.
The net cash flow from investments was -630 million (-429 million) in the quarter and -1,062 million (-420 million) for the first six months of 2020, mainly driven by the cash effect from investment in and upgrades of investment properties of -612 million (-360 million) in the quarter and -1,024 million (-695 million) in the first half of the year.
Net cash flow from financing acitivites was 437 million (107 million) in the quarter and 329 million (-219 million) year to date 2020. During the quarter, Entra had an increase in bond financing of 1,207 million and a decrease in bank financing of 310 million. In addition, the Group has paid dividend of 437 million (420 million) to the shareholders of Entra ASA.
The net change in cash and cash equivalents was -1 million (-130 million) in the quarter and -58 million (-17 million) for the first six months of 2020.
Financing
During the second quarter, Entra's gross interest-bearing nominal debt increased by 897 million to 20,692 million. The change in interest bearing debt comprised a net increase in bond financing of 1,207 million and a decrease in bank financing of 310 million.
In the quarter, Entra issued a new seven-year green bond of 1,500 million. The new green bond is earmarked funding of a pool of properties/projects with high environmental standards and a certification from BREEAM with a minimum certification of "excellent". Entra has also repurchased 293 million of short dated outstanding bonds. Further, commercial paper loans has been refinanced with 1,200 million.
In the second quarter, Entra extended a 1,500 million revolving credit facility with one year, bringing the maturity for this credit facility to 29.06.24.
As of 30.06.20, net nominal interest bearing debt after deduction of liquid assets of 259 million (213 million) was 20,433 million (19,228 million).
The average remaining term for the Group's debt portfolio was 4.8 years at 30.06.20 (5.4 years). The calculation takes into account that available long-term credit facilities can replace short-term debt.
Entra's financing is mainly based on negative pledge of the Group's assets, which enables a broad and flexible financing mix. Entra's financing structure includes bank loans, bonds and commercial papers. At the end of the period, 72 per cent (75 per cent) of the Group's financing came from debt capital markets.
Maturity profile and composition interest bearing debt
| Maturity profile | 0-1 yrs | 1-2 yrs | 2-3 yrs | 3-4 yrs | 4+ yrs | Total | % |
|---|---|---|---|---|---|---|---|
| Commercial papers (NOKm) | 1 600 | 0 | 0 | 0 | 0 | 1 600 | 8 |
| Bonds (NOKm) | 1 512 | 1 200 | 2 900 | 2 395 | 5 250 | 13 257 | 64 |
| Bank loans (NOKm) | 728 | 0 | 2 240 | 948 | 1 920 | 5 835 | 28 |
| Total (NOKm) | 3 840 | 1 200 | 5 140 | 3 343 | 7 170 | 20 692 | 100 |
| Unutilised credit facilities (NOKm) | 0 | 1 750 | 1 260 | 4 340 | 0 | 7 350 | |
| Unutilised credit facilities (%) | 0 | 24 | 17 | 59 | 0 | 100 |
Financing policy and status
| 30.06.2020 | Target | |
|---|---|---|
| Loan-to-value (LTV) | 40.6% | Below 50 per cent over time |
| Interest coverage ratio (ICR) | 3.3 | Min. 1.8x |
| Debt maturities <12 months | 19% | Max 30% |
| Maturity of hedges <12 months | 45% | Max 60% |
| Average time to maturity (hedges) | 2.7 | 2-6 years |
| Back-stop of short-term interest bearing debt | 236% | Min. 100% |
| Average time to maturity (debt) | 4.8 | Min. 3 years |
Interest rates and maturity structure
The average interest rate1) of the debt portfolio was 2.39 per cent (2.80 per cent) as at 30.06.20. The change in average interest rate stems mainly from lower Nibor interest rates.
55 per cent (56 per cent) of the Group's financing was hedged at a fixed interest rate as at 30.06.20 with a weighted average maturity of 2.7 years (3.4 years).
The Group manages interest rate risk through floating-to-fixed interest rate swaps and fixed rate bonds. The table below shows the maturity profile and contribution from these fixed rate instruments, as well as the maturity profile for credit margins on debt.
| Fixed rate instruments² | Forward starting swaps³ | Average credit margin | ||||||
|---|---|---|---|---|---|---|---|---|
| Amount (NOKm) |
Interest rate (%) |
Amount | Interest rate Tenor (%) (years) |
Amount (NOKm) |
Credit margin (%) |
|||
| <1 year | 350 | 5.2 | 800 | 2.21 | 5.8 | 5 207 | 1.03 | |
| 1-2 years | 1 750 | 2.1 | 1 200 | 0.78 | ||||
| 2-3 years | 1 600 | 1.9 | 5 140 | 0.98 | ||||
| 3-4 years | 250 | 3.7 | 2 395 | 0.87 | ||||
| 4-5 years | 1 700 | 2.4 | 1 450 | 0.75 | ||||
| 5-6 years | 2 700 | 2.1 | 1 200 | 0.86 | ||||
| 6-7 years | 2 060 | 2.2 | 3 000 | 0.97 | ||||
| 7-8 years | 0 | 0.0 | 0 | 0.00 | ||||
| 8-9 years | 0 | 0.0 | 0 | 0.00 | ||||
| 9-10 years | 400 | 5.6 | 1 100 | 0.39 | ||||
| >10 years | 100 | 1.8 | 0 | 0.00 | ||||
| Total | 10 910 | 2.4 | 800 | 2.21 | 5.8 | 20 692 | 0.91 |
¹Average reference rate (Nibor) is 0.47 per cent as of the reporting date.
²Excluding forward starting swaps and credit margins on fixed rate bonds (credit margins are displayed in the table to the right).
³The table displays future starting point, notional principle amount, average fixed rate and tenor for forward starting swaps.
The property portfolio
Entra's management portfolio consists of 75 properties with a total area of approximately 1.1 million square meters. As of 30.06.20, the management portfolio had a market value of 44.7 billion. The occupancy rate was 97.6 per cent (96.0 per cent). The weighted average lease term for the Group's leases was 6.8 years (6.4) for the management portfolio and 6.8 years (7.0) when the project portfolio is included. For the management portfolio, the public sector represents approximately 58 per cent of the total rental income. The entire property portfolio consists of 90 properties with a market value of 50.6 billion.
Entra's properties are valued by two external appraisers (Akershus Eiendom/JLL and Newsec) on a quarterly basis. The market value of the portfolio in Entra's balance sheet is based on the average of the appraisers' valuation. Valuation of the management portfolio is performed on a property by property basis, using individual DCF models and taking into account the property's current characteristics combined with the external
appraiser's estimated return requirements and expectations on future market development.
The market value is defined as the external appraiser's estimated transaction value of the individual properties on valuation date. The project portfolio is valued based on the same principles, but with deduction for remaining investments and perceived risk as of valuation date. The land and development portfolio is valued based on actually zoned land.
Year-on-year, the portfolio net yield is reduced from 4.9 to 4.8 per cent. 12 months rolling rent per square meter increased from 2,013 to 2,149 mainly driven by properties that are vacated during 2019 and awaiting redevelopment have been reclassified to the project portfolio in 2020.
The market rent has increased by 5 per cent, from 2,169 to 2,275 per square meter.
| Properties | Area | Occupancy | Wault | Market value | 12 months rolling rent | Net yield1 | Market rent | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (#) | (sqm) | (%) | (year) | (NOKm) | (NOK/sqm) | (NOKm) | (NOK/sqm) | (%) | (NOKm) | (NOK/sqm) | |
| Oslo | 34 | 557 984 | 97.4 | 6.8 | 27 594 | 49 453 | 1 370 | 2 455 | 4.6 | 1 486 | 2 664 |
| Trondheim | 11 | 158 973 | 96.5 | 7.4 | 4 820 | 30 317 | 283 | 1 782 | 5.5 | 280 | 1 764 |
| Bergen | 8 | 119 538 | 97.9 | 5.3 | 4 889 | 40 898 | 233 | 1 947 | 4.4 | 287 | 2 405 |
| Sandvika | 9 | 98 988 | 99.9 | 8.0 | 3 021 | 30 514 | 174 | 1 762 | 5.5 | 154 | 1 556 |
| Stavanger | 5 | 78 607 | 99.1 | 6.6 | 2 221 | 28 251 | 140 | 1 784 | 5.8 | 129 | 1 647 |
| Drammen | 8 | 69 506 | 98.2 | 6.4 | 2 190 | 31 501 | 128 | 1 842 | 5.5 | 128 | 1 835 |
| Management portfolio |
75 | 1 083 596 | 97.6 | 6.8 | 44 733 | 41 282 | 2 329 | 2 149 | 4.8 | 2 465 | 2 275 |
| Project portfolio | 9 | 128 814 | 9.1 | 5 113 | 39 690 | ||||||
| Development sites | 6 | 114 859 | 0.3 | 765 | 6 657 | ||||||
| Property portfolio | 90 | 1 327 268 | 6.8 | 50 610 | 38 131 |
1) See the section "Definitions". The calculation of net yield is based on the appraisers' assumption of ownership costs, which at 30.06.20 corresponds to 7.1 per cent of market rent.
Letting activity
During the second quarter, Entra signed new and renegotiated leases with an annual rent totalling 95 million (40,800 square metres) and received notices of termination on leases with an annual rent of 38 million (14,400 square metres). Net letting was 14 million in the quarter. Net letting is calculated as the
annualised rent of new lease contracts plus lease-up on renegotiated contracts less terminated contracts. For the first six months, Entra signed new and renegotiated lease contracts of a total of 181 million, while lease contracts of 83 million was terminated. Net letting in the period was 29 million.
Significant contracts signed in the quarter:
- New and renegotiated 10-year lease contract with Oslo Municipality for 10,100 sqm in Hagegata 22-24 in Oslo
- New 10-year lease contract with Statsbygg for 9,300 sqm in Biskop Gunnerus' gate 6 in Oslo
- New 10-year lease contract for 5,000 sqm in Grønland 32 in Drammen
- New 10-year lease contract for 1,400 sqm in Langkaia 1 in Oslo
- New 10-year lease contract for 1,100 sqm in Langkaia 1 in Oslo
MATURITY PROFILE OF THE MANAGEMENT PORTFOLIO:
Investments and divestments
Entra has invested a total of 573 million (373 million) in the portfolio of investment properties in the second quarter. The decomposition of the investments is as follows:
| All amounts in NOK million | Q2-20 | Q2-19 | YTD Q2-20 | YTD Q2-19 | 2019 |
|---|---|---|---|---|---|
| Aquisitions1) | 156 | 0 | 156 | 23 | 1174 |
| Developments | 390 | 348 | 824 | 692 | 1352 |
| - Newbuild projects | 47 | 153 | 74 | 305 | 320 |
| - Redevelopment projects | 336 | 161 | 712 | 321 | 917 |
| - Refurbishment1) | 7 | 33 | 38 | 66 | 115 |
| Investment properties | 20 | 17 | 43 | 34 | 120 |
| - Incremental lettable space | 0 | 0 | 0 | 0 | 0 |
| - No incremental lettable space and tenant incentives | 15 | 17 | 32 | 34 | 112 |
| - Other material non-allocated types of expenditure | 5 | 0 | 12 | 0 | 8 |
| Capitalised interest | 7 | 8 | 15 | 18 | 41 |
| Total Capital Expenditure | 573 | 373 | 1 038 | 768 | 2 686 |
| Conversion from accrual to cash basis | 61 | -13 | 9 | -49 | -19 |
| Total Capital Expenditure on cash basis | 635 | 360 | 1 047 | 719 | 2 668 |
1) Includes settlement regarding the purchase option for Munchs gate 4/Keysers gate 13
Project development
The portfolio of ongoing project with a total investment exceeding 50 million is presented below.
| Ownership (%) |
Location | Expected completion |
Project area (sqm) |
Occupancy (%) |
Estimated total project cost (NOKm) 1) |
Of which accrued1) (NOKm) |
Yield on cost(%)2) |
|
|---|---|---|---|---|---|---|---|---|
| Redevelopment | ||||||||
| Kristian Augusts gate 13 | 100 | Oslo | Q4-20 | 4 300 | 100 | 304 | 258 | 5.0 |
| Universitetsgata 7-9 | 100 | Oslo | Q3-21 | 21 900 | 52 | 1 235 | 744 | 5.9 |
| Universitetsgata 2 - Rebel | 100 | Oslo | Q3-21 | 28 100 | 35 | 1 650 | 1 211 | 5.6 |
| Refurbishment | ||||||||
| Grønland 32 | 100 | Drammen | Q2-21 | 5 000 | 100 | 158 | 94 | 7.0 |
| Hagegata 22-24 | 100 | Oslo | Q4-21 | 10 100 | 100 | 433 | 355 | 5.5 |
| Total | 69 400 | 3 780 | 2 662 |
1) Total project cost (Including book value at date of investment decision/cost of land)
2) Estimated net rent (fully let) at completion/total project cost (including cost of land)
Status ongoing projects
In Tullinkvartalet in Oslo, Entra is building a new 21,900 sqm office property in Universitetsgata 7-9 in Oslo. Occupancy is currently 52 per cent. The property is expected to be finalised in Q3 2021 with high environmental ambitions and aims for a BREEAM-NOR Excellent classification.
Entra is further renovating and expanding a 4,300 sqm office property at Kristian Augusts gate 13. The project will demonstrate Entra's strong commitment to work for more sustainable solutions by incorporating a target of more than 60 per cent re-use of building materials. Occupancy is at 100 per cent as the property will be let to the co-working operator IWG/Spaces. The project is expected to be completed in Q4 2020.
Next to Tullinkvartalet, Entra also has the renovation project Rebel ongoing in Universitetsgata 2. Rebel will be a hub for large and small tech companies and will be managed 50/50 by Entra and an external partner. The 28,100 sqm building will
Transactions
Entra actively seeks to improve the quality of its property portfolio. Entra focuses on acquisitions of large properties and projects in specific areas within its four core markets; Oslo and the surrounding region, Bergen, Trondheim and Stavanger. Target areas include both areas in the city centers and selected clusters and public transportation hubs outside the city centers, allowing Entra to offer rental opportunities at a price
consist of office space, co-working areas, conference centre and restaurants. Occupancy is currently 35 per cent. Rebel will offer a full-service concept through flexible short-term contracts with access to meeting rooms, wi-fi and more through memberships. The project is expected to be completed in Q3 2021.
In Grønland 32, a central riverside location in Drammen outside Oslo, Entra is refurbishing 5,000 sqm in an approximately 7,400 sqm office building for Vestre Viken HF. The project is expected to be completed in Q2 2021.
In Tøyen in Oslo, Entra is refurbishing almost 10,100 sqm in Hagegata 22-24 based on a new contract signed by the Municipality of Oslo on behalf of the borough administration in Gamle Oslo. The office space going into refurbishment is almost half of the area in the properties. Occupancy in the project space will remain at about 80 per cent during the construction period. The project is expected to be completed at the end of 2021.
range that fits its customer base. Entra's experience, financial strength and knowledge of its tenants makes the company well positioned to make acquisitions that meets these acquisition criteria. The acquisition and divestment strategy is flexible, allowing Entra to adapt to feedback from customers and market changes, and to create and respond to market opportunities as they arise.
Transactions in 2019 and 2020
| Transaction | Transaction | ||||
|---|---|---|---|---|---|
| Purchased properties | Area | quarter | No of sqm | value | Closing date |
| Share of Jåttåvågen Fase 2 | Stavanger | Q4 2019 | - | 13 | Q4 2019 |
| Møllendalsveien 6-8 | Bergen | Q4 2019 | 14 500 | 400 | Q4 2019 |
| Section of Kristian Augusts gate 11 | Oslo | Q1 2019 | 23 | Q2 2020 | |
| Sum | 14 500 | 436 | |||
| Transaction | Transaction | ||||
| Sold properties | quarter | No of sqm | value | Closing date | |
| Kristian Augusts gate 23 | Oslo | Q3 2019 | 8 750 | 450 | Q4 2019 |
| Sorgenfriveien 11 | Trondheim | Q3 2019 | - | 50 | Q3 2019 |
| Section of Karoline Kristiansens vei 2 | Oslo | Q2 2019 | 450 | 23 | Q2 2019 |
| Sum | 9 200 | 523 |
Partly owned companies
Papirbredden Eiendom AS (60 %)
Entra and Drammen Municipality own Papirbredden Eiendom AS. The company owns six office properties totalling 59,000 sqm and a future development potential of 60,000 sqm in Drammen.
Hinna Park Eiendom AS (50 %)
Entra and Camar Eiendom own Hinna Park Eiendom AS. The company owns three office properties totalling 28,000 sqm and development potential for two new office properties of 37,000 sqm. The company is consolidated in the Group's financial statements as Entra has a controlling vote on the Board of Directors.
Entra OPF Utvikling AS (50 %)
Entra and Oslo Pensjonsforsikring (OPF) own Entra OPF Utvikling AS. The company owns two properties in Bergen, Lars Hilles gate 30 (Media City Bergen) and Allehelgens gate 6. The company is consolidated in the Group's financial statements as Entra has a controlling vote on the Board of Directors.
Oslo S Utvikling AS "OSU" (33.33 %)
OSU is a property development company that is undertaking primarily residential development in the city district Bjørvika, Oslo's CBD East.
Rebel U2 AS (50 %)
Rebel U2 AS will provide facility management services in Universitetsgata 2 in Oslo – with full-service solutions, flexible and short-term leases, co-working, conferences and events.
Financial figures for partly owned entities and JVs (based on 100 % ownership)
| All amounts in NOK million | Papirbredden Eiendom AS |
Hinna Park Eiendom AS |
Entra OPF Utvikling AS |
Total consolidated companies |
Oslo S Utvikling AS |
Rebel U2 AS | Other | Total associated companies & JVs |
|---|---|---|---|---|---|---|---|---|
| Share of ownership (%) | 60 | 50 | 50 | 33 | 50 | |||
| Rental income | 29 | 21 | 33 | 83 | 1 | -1 | 0 | |
| Net operating income | 26 | 20 | 30 | 76 | -1 | -2 | -4 | |
| Net income | 20 | 10 | 30 | 60 | -8 | -3 | 2 | -8 |
| Changes in value of investment properties | 68 | -106 | 53 | 16 | 0 | 0 | 0 | 0 |
| Changes in value of financial instruments | 0 | 0 | 0 | 0 | 2 | 0 | 0 | 2 |
| Profit before tax | 88 | -96 | 82 | 75 | -6 | -3 | 2 | -6 |
| Tax | -20 | 22 | -18 | -16 | 9 | 1 | 0 | 9 |
| Profit for the period | 69 | -74 | 64 | 59 | 3 | -2 | 2 | 3 |
| Non-controlling interests | 28 | -37 | 32 | 23 | ||||
| Entra's share of profit1) | 1 | -1 | 1 | 1 | ||||
| Book value | 411 | 12 | 23 | 447 | ||||
| Market value properties | 1 916 | 1 113 | 2 938 | 5 967 | 3 827 | 3 827 | ||
| Entra's share: | ||||||||
| Market value properties | 1 149 | 557 | 1 469 | 3 175 | 1 276 | 1 276 | ||
| EPRA NAV | 717 | 192 | 1 521 | 2 431 | 785 | 12 | 23 | 821 |
| EPRA NNNAV | 671 | 175 | 1 478 | 2 324 | 721 | 12 | 23 | 757 |
1) Recognised as Share of profit from associates and JVs
Other information
Organisation and HSE
At 30.06.20 the Group had 181 (170) employees.
In Q2 2020, Entra had one injury with long term absence from work in the ongoing projects. Entra has a continuous HSE focus both in on-going projects and in the operations and works continually to avoid injuries. The Group had an LTIF rate (number of accidents with lost time per million hours worked in last 12 months) on ongoing projects of 4.6 at the end of the second quarter 2020 vs. 2.2 at the end of the fourth quarter 2019.
Risk management
Entra assesses risk on an ongoing basis, primarily through semiannually comprehensive reviews of the Group's risk maps, which includes assessments of all risk factors in collaboration with all levels of the organization. Each risk factor is described and presented with the possible negative outcome given an increased probability of a situation to occur. Entra's main risk factors consist of both financial and non-financial risk. A thorough description and analysis is included on pages 28-33 in the 2019 annual report.
The main risk factors described in the annual report does not include an evaluation of a pandemic. Depending on the length of crisis and the risk of a second wave of the pandemic and the strength and effect of the government interventions, the Covid-19 or similar situations may have adverse effects on Entra's business. Entra has a strong tenant base with a seven-year WAULT with a solid backbone of high-quality tenants, including public tenants comprising 58 per cent of revenue. Less than 10 per cent of Entra's rental income stems from industries that are most affected by the current situation. Entra continuously work on risk reducing measures in the portfolio, including rent levels, lease lengths, counter party risk, occupancy ratio, and the overall quality of the portfolio. Entra further maintains a diversified financing structure with a balanced maturity profile and financing mix in order to ensure stable and predictable access to capital.
The main risk factors described in the annual report include development in value of property. The Covid-19 situation may however affect the occupancy, market rent expectations and yields, among the main factors when performing valuation of properties. Consequently, the valuation uncertainty is higher at 30.06.2020 than at 31.12.2019. Entra monitors and mitigates
the risk quarterly through active dialogue with its two external appraisers (Akershus Eiendom/JLL and Newsec).
Share and shareholder information
Entra's share capital is NOK 182,132,055 divided into 182,132,055 shares, each with a par value of NOK 1 per share. Entra has one class of shares and all shares provide equal rights, including the right to any dividends.
As of 3 July 2020, Entra had 7,695 shareholders. Norwegian investors held 30 per cent of the share capital. The 10 largest shareholders as registered in VPS 3 July 2020 were:
| Shareholder | % holding |
|---|---|
| Folketrygdfondet | 11.1 |
| Norwegian Ministry of Trade, Industry and Fisheries | 8.2 |
| State Street Bank (Nominee) | 7.7 |
| The Bank of New York (Nominee) | 3.4 |
| JP Morgan Chase Bank (Nominee) | 1.7 |
| BNP Paribas Securities (Nominee) | 1.6 |
| Danske Invest Norske | 1.5 |
| Corem Property Group | 1.2 |
| State Street Bank (Nominee) | 1.1 |
| BNP Paribas Securities (Nominee) | 1.1 |
| SUM 10 LARGEST SHAREHOLDERS | 38.7 |
Events after the balance sheet date
The Board has decided to pay out a semi-annual dividend of NOK 2.40 per share for the first half of 2020. The dividend will be paid out on 12 October 2020 to the shareholders as of 1 October 2020.
Outlook
Well into the Covid-19 crisis, it is still difficult to assess the overall impact on the global and Norwegian economy and the longer term implications for the commercial real estate sector. The recent months have, however, brought somewhat more clarity about the slowdown in economic activity and the cascading impact of supply-and-demand shocks propagating through the system.
The Norwegian government acted at the outset of the crisis and implemented actions to safeguard the population and to ensure the survival of businesses through extensive support packages, including a targeted cash support initiative to cover fixed costs for affected businesses. With solid infrastructure and a strong public funding, including the Government Pension Fund Global, Norway has the fundamentals in place for a recovery post-crisis. Most businesses have gradually re-opened after the lockdown in March, and the virus spread is currently under control in Norway. The situation is however being carefully monitored in case of a second wave of the pandemic.
Entra has taken the necessary measures to protect the health and safety of our community, our tenants and other users of our buildings, as well as our employees. Our contingency plans, procedures, routines and staff are in place, and we have continued to deliver our services and property management without interruption throughout the crisis. We have found individual solutions that give tenants that struggle room to return to normal operation after this demanding period. In the first instance, we have helped tenants that are affected by changing payment schemes from upfront quarterly to monthly invoices or giving monthly postponements on rent. If the Covid-19 crisis should worsen, we will facilitate further, targeted support to customers particularly affected.
Entra's tenant base is strong with almost seven year WAULT and a solid backbone of public tenants comprising 58 per cent of revenues, as well as limited exposure to the industries most affected by the Covid-19 situation.
Further, the oil and gas prices have rebounded somewhat after the decline during the spring, and we now see price levels that justify continued activity for the Norwegian oil and gas industry. Regardless, Entra's exposure to oil and gas is limited with only around two per cent of total revenues through a fully consolidated 50/50 joint venture.
Entra's financial position is strong with a well staggered debt maturity profile, a diversified financing mix, cash and unutilized credit facilities of 7.6 billion, 2.4 times all debt falling due next 12 months. We have strong relationships and continuous dialogues with our five banks, and we assess that the bank market is open and supportive to our funding needs. During the second quarter, the debt capital markets gradually became more attractive with increased liquidity and a sharp contraction of credit spreads. Ultimo June, Entra capitalised on this favourable development by issuing a new seven year 1.5 billion green bond. Entra has also ample headroom to financial covenants, which are Loan-to-value of 75 per cent (40.6 per cent as of Q2) and Interest coverage ratio of 1.4 (3.3 as of Q2).
Uncertainty will prevail also in the months to come. Going forward, the office market might experience changes in workplace strategies and office layouts to accommodate a more mobile and digital way of working. Entra manages modern, flexible and environmentally friendly assets located in attractive clusters near public transportation hubs. Combined with a solid tenant base with long lease contracts, a strong financial position, and an extensive project pipeline for future growth, Entra has a proven and resilient business profile that is well positioned for the future.
Oslo, 9 July 2020
The Board of Entra ASA
Financial statements
Statement of comprehensive income
| All amounts in NOK million | Q2-20 | Q2-19 | YTD Q2-20 | YTD Q2-19 | 2019 |
|---|---|---|---|---|---|
| Rental income | 587 | 580 | 1 174 | 1 165 | 2 338 |
| Operating costs | -65 | -50 | -108 | -93 | -189 |
| Net operating income | 522 | 530 | 1 066 | 1 072 | 2 149 |
| Other revenue | 20 | 71 | 38 | 140 | 300 |
| Other costs | -14 | -67 | -23 | -128 | -260 |
| Administrative costs | -39 | -42 | -89 | -90 | -171 |
| Share of profit from associates and JVs | 1 | 132 | 39 | 155 | 312 |
| Net realised financials | -141 | -139 | -288 | -271 | -551 |
| Net income | 349 | 484 | 744 | 880 | 1 780 |
| - of which net income from property management | 350 | 352 | 706 | 727 | 1 471 |
| Changes in value of investment properties | 619 | 472 | 619 | 956 | 1 909 |
| Changes in value of financial instruments | -28 | -19 | -365 | -41 | 46 |
| Profit before tax | 940 | 937 | 997 | 1 795 | 3 735 |
| Tax payable | -6 | -3 | -10 | -6 | -11 |
| Change in deferred tax | -204 | -171 | -206 | -318 | -498 |
| Profit for period/year | 730 | 763 | 782 | 1 471 | 3 225 |
| Actuarial gains and losses | 0 | 0 | 0 | 0 | 5 |
| Change in deferred tax on comprehensive income | 0 | 0 | 0 | 0 | -1 |
| Total comprehensive income for the period/year | 730 | 763 | 782 | 1 471 | 3 229 |
| Profit attributable to: | |||||
| Equity holders of the Company | 706 | 703 | 742 | 1 357 | 2 946 |
| Non-controlling interest | 23 | 60 | 40 | 113 | 279 |
| Total comprehensive income attributable to: | |||||
| Equity holders of the Company | 706 | 703 | 742 | 1 357 | 2 949 |
| Non-controlling interest | 23 | 60 | 40 | 113 | 279 |
Balance sheet
| All amounts in NOK million | 30.06.2020 | 30.06.2019 | 31.12.2019 |
|---|---|---|---|
| Intangible assets | 117 | 137 | 117 |
| Investment properties | 50 736 | 46 660 | 49 095 |
| Other operating assets | 18 | 21 | 22 |
| Investments in associates and JVs | 447 | 393 | 397 |
| Financial derivatives | 431 | 316 | 274 |
| Long-term receivables and other assets | 250 | 259 | 256 |
| Total non-current assets | 52 000 | 47 785 | 50 161 |
| Inventory properties | 416 | 412 | 413 |
| Trade receivables | 44 | 57 | 43 |
| Other receivables and other current assets | 390 | 724 | 226 |
| Cash and bank deposits | 259 | 213 | 317 |
| Total current assets | 1 109 | 1 407 | 998 |
| Investment properties held for sale | 0 | 260 | 0 |
| Total assets | 53 109 | 49 452 | 51 160 |
| Shareholders' equity | 22 874 | 21 397 | 22 570 |
| Non-controlling interests | 1 967 | 1 856 | 1 947 |
| Total equity | 24 842 | 23 252 | 24 517 |
| Interest bearing debt | 16 837 | 15 591 | 17 362 |
| Deferred tax liability | 5 573 | 5 177 | 5 367 |
| Financial derivatives | 864 | 471 | 341 |
| Other non-current liabilities | 499 | 687 | 505 |
| Total non-current liabilities | 23 773 | 21 926 | 23 576 |
| Interest bearing debt | 3 858 | 3 839 | 2 539 |
| Trade payables | 199 | 202 | 200 |
| Other current liabilities | 437 | 232 | 328 |
| Total current liabilities | 4 494 | 4 273 | 3 067 |
| Total liabilities | 28 268 | 26 200 | 26 642 |
| Total equity and liabilities | 53 109 | 49 452 | 51 160 |
Changes in equity
| All amounts in NOK million | Share capital |
Treasury shares |
Other paid-in capital |
Retained earnings |
Non controlling interests |
Total equity |
|---|---|---|---|---|---|---|
| Equity 01.01.2019 | 184 | -1 | 3 535 | 16 800 | 1 742 | 22 260 |
| Profit for period | 2 946 | 279 | 3 225 | |||
| Other comprehensive income | 4 | 4 | ||||
| Equity transaction at fair value in JV | 11 | 11 | ||||
| Dividend | -840 | -75 | -915 | |||
| Net equity effect of LTI & employee share saving scheme | 0 | 0 | -2 | -2 | ||
| Repurchase of shares | -1 | -12 | -54 | -66 | ||
| Share capital decrease | -2 | 2 | 0 | |||
| Equity 31.12.2019 | 182 | 0 | 3 523 | 18 865 | 1 947 | 24 517 |
| Profit for period | 742 | 40 | 782 | |||
| Dividend | -437 | -20 | -457 | |||
| Net equity effect of LTI & employee share saving scheme | 0 | 0 | -1 | 0 | ||
| Equity 30.06.2020 | 182 | 0 | 3 524 | 19 169 | 1 967 | 24 842 |
Statement of cash flows
| All amounts in NOK million | Q2-20 | Q2-19 | YTD Q2-20 | YTD Q2-19 | 2019 |
|---|---|---|---|---|---|
| Profit before tax | 940 | 937 | 997 | 1 795 | 3 735 |
| Income tax paid | 0 | 0 | -10 | -8 | -11 |
| Net expensed interest and fees on loans and leases | 141 | 139 | 288 | 271 | 551 |
| Net interest and fees paid on loans and leases | -206 | -230 | -338 | -349 | -582 |
| Share of profit from associates and jointly controlled entities | -1 | -132 | -39 | -155 | -312 |
| Depreciation and amortisation | 1 | 2 | 3 | 4 | 8 |
| Changes in value of investment properties | -619 | -472 | -619 | -956 | -1 909 |
| Changes in value of financial instruments | 28 | 19 | 365 | 41 | -46 |
| Change in working capital | -93 | -72 | 28 | -21 | -81 |
| Net cash flow from operating activities | 191 | 192 | 676 | 622 | 1 352 |
| Proceeds from property transactions | 15 | 22 | 15 | 312 | 1 619 |
| Purchase of investment properties | -23 | 0 | -23 | -23 | -1 241 |
| Investment in and upgrades of investment properties | -612 | -360 | -1 024 | -695 | -1 427 |
| Investment in properties for sale and inventory properties | -1 | -66 | -3 | -113 | -192 |
| Purchase of intangible and other non-current assets | -9 | -6 | -17 | -15 | -35 |
| Net payment financial assets | -1 | -19 | 0 | -26 | -23 |
| Net payment of loans to associates and JVs | 0 | 0 | 0 | 0 | 1 |
| Net payments in associates and JVs | 0 | 0 | -13 | 0 | -16 |
| Dividends from associates and JVs | 2 | 0 | 2 | 140 | 308 |
| Net cash flow from investment activities | -630 | -429 | -1 062 | -420 | -1 005 |
| Proceeds interest bearing debt | 4 440 | 6 180 | 7 635 | 10 730 | 16 430 |
| Repayment interest bearing debt | -3 543 | -5 590 | -6 844 | -10 460 | -15 699 |
| Repayment of lease liabilities | -2 | 0 | -5 | 0 | -9 |
| Proceeds from issue of shares/repurchase of shares | 0 | -63 | 0 | -69 | -69 |
| Dividends paid | -437 | -420 | -437 | -420 | -840 |
| Dividends paid to non-controlling interests | -20 | 0 | -20 | 0 | -75 |
| Net cash flow from financing activities | 437 | 107 | 329 | -219 | -260 |
| Change in cash and cash equivalents | -1 | -130 | -58 | -17 | 87 |
| Cash and cash equivalents at beginning of period | 260 | 343 | 317 | 230 | 230 |
| Cash and cash equivalents at end of period | 259 | 213 | 259 | 213 | 317 |
NOTE 1 – ACCOUNTING PRINCIPLES
The results for the period have been prepared in accordance with IAS 34 Interim Financial Reporting. The accounting principles that have been used in the preparation of the interim financial statements are in conformity with the principles used in preparation of the annual financial statements for 2019.
The financial reporting covers Entra ASA, subsidiaries, associated companies and jointly controlled entities. The interim financial statements have not been audited.
NOTE 2 – SEGMENT INFORMATION
The Group has one main operational unit, led by the COO. The property portfolio is divided into six different geographic areas in Oslo, Sandvika, Drammen, Stavanger, Bergen and Trondheim, with management teams monitoring and following upon each area. The geographic units are supported by a Market and Property Development division, Project Development division and a Digital and Business Development division. In addition, Entra has group and support functions within accounting and finance, legal, investment, procurement, communication and HR.
The geographic areas do not have their own profit responsibility. The geographical areas are instead followed up on economical and noneconomical key figures ("key performance indicators"). These key figures are analysed and reported by geographic area to the chief operating decision maker, that is the board and CEO, for the purpose of resource allocation and assessment of segment performance. Hence, the Group report the segment information based upon these six geographic areas.
Operating segments Q2–20
| Properties | Area | Occupancy | Wault | Market value | 12 months rolling rent | Net yield1 | Market rent | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (#) | (sqm) | (%) | (year) | (NOKm) | (NOK/sqm) | (NOKm) | (NOK/sqm) | (%) | (NOKm) | (NOK/sqm) | |
| Oslo | 34 | 557 984 | 97.4 | 6.8 | 27 594 | 49 453 | 1 370 | 2 455 | 4.6 | 1 486 | 2 664 |
| Trondheim | 11 | 158 973 | 96.5 | 7.4 | 4 820 | 30 317 | 283 | 1 782 | 5.5 | 280 | 1 764 |
| Bergen | 8 | 119 538 | 97.9 | 5.3 | 4 889 | 40 898 | 233 | 1 947 | 4.4 | 287 | 2 405 |
| Sandvika | 9 | 98 988 | 99.9 | 8.0 | 3 021 | 30 514 | 174 | 1 762 | 5.5 | 154 | 1 556 |
| Stavanger | 5 | 78 607 | 99.1 | 6.6 | 2 221 | 28 251 | 140 | 1 784 | 5.8 | 129 | 1 647 |
| Drammen | 8 | 69 506 | 98.2 | 6.4 | 2 190 | 31 501 | 128 | 1 842 | 5.5 | 128 | 1 835 |
| Management portfolio |
75 | 1 083 596 | 97.6 | 6.8 | 44 733 | 41 282 | 2 329 | 2 149 | 4.8 | 2 465 | 2 275 |
| Project portfolio | 9 | 128 814 | 9.1 | 5 113 | 39 690 | ||||||
| Development sites | 6 | 114 859 | 0.3 | 765 | 6 657 | ||||||
| Property portfolio | 90 | 1 327 268 | 6.8 | 50 610 | 38 131 |
1) See the section "Definitions". The calculation of net yield is based on the appraisers' assumption of ownership costs, which at 30.06.20 corresponds to 7.1 per cent of market rent.
| Number | Area | Occupancy | Wault | Market value | 12 months rolling rent | Net yield1 | Market rent | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (#) | (sqm) | (%) | (year) | (NOKm) | (NOK/sqm) | (NOKm) | (NOK/sqm) | (%) | (NOKm) | (NOK/sqm) | |
| Oslo | 37 | 603 327 | 95.7 | 5.6 | 26 754 | 44 344 | 1 344 | 2 227 | 4.6 | 1 495 | 2 478 |
| Trondheim | 10 | 153 750 | 94.3 | 7.3 | 4 477 | 29 121 | 241 | 1 570 | 5.0 | 268 | 1 744 |
| Bergen | 7 | 105 360 | 95.0 | 6.8 | 4 110 | 39 013 | 213 | 2 021 | 4.7 | 246 | 2 336 |
| Sandvika | 9 | 98 988 | 99.7 | 8.7 | 2 900 | 29 299 | 171 | 1 730 | 5.5 | 150 | 1 513 |
| Stavanger | 5 | 78 579 | 98.5 | 8.2 | 2 216 | 28 195 | 139 | 1 766 | 5.8 | 131 | 1 663 |
| Drammen | 8 | 70 423 | 98.3 | 6.5 | 2 029 | 28 818 | 127 | 1 805 | 5.9 | 118 | 1 680 |
| Management portfolio |
76 | 1 110 426 | 96.0 | 6.4 | 42 487 | 38 262 | 2 235 | 2 013 | 4.9 | 2 408 | 2 169 |
| Project portfolio | 7 | 101 766 | 16.6 | 3 977 | 39 083 | ||||||
| Development sites | 7 | 114 859 | 0.3 | 848 | 7 384 | ||||||
| Property portfolio | 90 | 1 327 051 | 7.0 | 47 312 | 35 652 |
Operating segments Q2–19
1) See the section "Definitions". The calculation of net yield is based on the valuers' assumption of ownership costs, which at 30.06.19 corresponded to 7.2 per cent of market rent.
NOTE 3 – INVESTMENT PROPERTIES
| All amounts in NOK million | Q2-20 | Q2-19 | YTD Q2-20 | YTD Q2-19 | 2019 |
|---|---|---|---|---|---|
| Closing balance previous period | 49 559 | 46 097 | 49 095 | 45 279 | 45 279 |
| Implementation of IFRS 16 | 231 | 231 | |||
| Purchase of investment properties | 156 | 0 | 156 | 23 | 1 174 |
| Investment in the property portfolio | 411 | 365 | 867 | 726 | 1 472 |
| Capitalised borrowing costs | 7 | 8 | 15 | 18 | 41 |
| Sale of investment properties | -15 | -22 | -15 | -312 | -1 010 |
| Changes in value of investment properties1) | 619 | 472 | 619 | 956 | 1 909 |
| Closing balance | 50 736 | 46 920 | 50 736 | 46 920 | 49 095 |
| Investment properties held for sale | 0 | 260 | 0 | 260 | 0 |
| Investment properties | 50 736 | 46 660 | 50 736 | 46 660 | 49 095 |
1)Refer to the Value changes section on page 6 for information on changes in value of investment properties.
Purchase of investment properties includes the settlement regarding the purchase option for Munchs gate 4/Keysers gate 13 and acquired a section of Kristian Augusts gate 11 in Oslo.
NOTE 4 – INFORMATION ON THE FAIR VALUE OF ASSETS AND LIABILITIES
| - Derivatives | Level 2 | 864 | 471 | 341 |
|---|---|---|---|---|
| Financial liabilities measured at fair value through profit or loss | ||||
| Liabilities measured at fair value: | ||||
| Total | 51 202 | 47 267 | 49 404 | |
| - Equity instruments | Level 3 | 35 | 30 | 36 |
| - Derivatives | Level 2 | 431 | 316 | 274 |
| - Investment properties held for sale | Level 3 | 0 | 260 | 0 |
| - Investment properties | Level 3 | 50 736 | 46 660 | 49 095 |
| Assets measured at fair value through profit or loss | ||||
| Assets measured at fair value: | ||||
| All amounts in NOK million | Fair value level | 30.06.2020 | 30.06.2019 | 31.12.2019 |
NOTE 5 – RISK AND UNCERTAINTIES
The main risk factors described in the 2019 annual report does not include an evaluation of a pandemic. The main risk factors described in the annual report does include development in value of property. Due to the Covid-19 situation, the valuation uncertainty is higher at 30.06.2020 than at 31.12.2019. Refer to the Risk management section on page 15 for further information.
NOTE 6 – LEGAL DISPUTES
With reference to note 38 to the annual financial statements for 2019, the Norwegian Ministry of Local Government and Modernisation has had an option to buy the property Munchs gate 4/Keysers gate 13, which is let to the Norwegian Ministry of Justice and Public Security. Entra has been of the opinion that the purchase option was voided in 2014. The Ministry of Local Government and Modernisation had a conflicting view and applied for a ruling by the Oslo District Court, which ruled in favour of the Ministry of Local Government and Modernisation in September 2019. Entra appealed the ruling.
In June 2020, the parties entered into a settlement where it was agreed that the option is lapsed. Entra further agreed to pay a compensation to the Norwegian Ministry of Local Government and Modernisation and reset the rent for the property to the current market rent from October 2020.
NOTE 7 – SUBSEQUENT EVENTS
Refer to the Events after the balance sheet date section on page 15 for information on significant events after period end.
DECLARATION OF THE BOARD AND CHIEF EXECUTIVE
We declare to the best of our belief that the half-year financial statements for the period 1 January to 30 June 2020 have been prepared in accordance with IAS 34 – Interim reporting, and that the information in the financial statements gives a true and fair view of the Group's assets, liabilities, financial situation and result as a whole. We also declare, to the best of our belief, that the half-year report gives a true and fair presentation of important events during the accounting period and their influence on the half-year financial statements, the most important risk and uncertainty factors that the business faces over the next accounting period, as well as material transactions with connected persons.
Oslo, 9 July 2020
Siri Hatlen Kjell Bjordal Widar Salbuvik Chair Deputy chair Board member
Camilla Tepfers Benedicte Schilbred Fasmer Erling Nedkvitne Board member Board member Board member
Marit Rasmussen Sonja Horn Board member Chief executive
ALTERNATIVE PERFORMANCE MEASURES
Entra's financial information is prepared in accordance with the international financial reporting standards (IFRS). In addition, the company reports alternative performance measures (APMs) that are regularly reviewed by management to enhance the understanding of Entra's performance as a supplement, but not as a substitute, to the financial statements prepared in accordance with IFRS. Financial APMs are intended to enhance comparability of the results and cash flows from period to period, and it is Entra's experience that these are frequently used by analysts, investors and other parties. The financial APMs reported by Entra are the APMs that, in management's view, provide the most relevant supplemental information of a real estate company's financial position and performance. These measures are adjusted IFRS measures defined, calculated and used in a consistent and transparent manner over the years. Operational measures such as, but not limited to, net letting, vacancy and WAULT are not defined as financial APMs according to ESMA's guidelines.
ENTRA'S FINANCIAL APMS:
- Net Income from property management
- Cash earnings
- Market value of the property portfolio
- Net nominal interest bearing debt
- Debt ratio Loan-to-value (LTV)
- Interest coverage ratio (ICR)
- EPRA Earnings
- Net Asset Value EPRA NAV, EPRA NNNAV and EPRA NRV
- EPRA net initial yield
- EPRA cost ratio
NET INCOME FROM PROPERTY MANAGEMENT & CASH EARNINGS
| All amounts in NOK million | Q2-20 | Q2-19 | YTD Q2-20 | YTD Q2-19 | 2019 |
|---|---|---|---|---|---|
| Net income | 349 | 484 | 744 | 880 | 1 780 |
| Less: | |||||
| Other income and costs in associates and JVs | 0 | 133 | 38 | 153 | 309 |
| Net income from property management | 350 | 352 | 706 | 727 | 1 471 |
| Tax payable | -6 | -3 | -10 | -6 | -11 |
| Cash earnings | 343 | 349 | 697 | 721 | 1 460 |
MARKET VALUE OF THE PROPERTY PORTFOLIO
| All amounts in NOK million | 30.06.2020 | 30.06.2019 | 31.12.2019 |
|---|---|---|---|
| Investment properties | 50 736 | 46 660 | 49 095 |
| Investment properties held for sale | 0 | 260 | 0 |
| Other | -126 | 392 | -131 |
| Market value of the property portfolio | 50 610 | 47 312 | 48 964 |
NET NOMINAL INTEREST BEARING DEBT
| All amounts in NOK million | 30.06.2020 | 30.06.2019 | 31.12.2019 |
|---|---|---|---|
| Nominal value of interest bearing debt | 20 692 | 19 441 | 19 901 |
| Cash and bank deposits | -259 | -213 | -317 |
| Net nominal interest bearing debt | 20 433 | 19 228 | 19 585 |
DEBT RATIO (LTV)
| Debt ratio (LTV) % | 40.6 | 40.8 | 40.2 |
|---|---|---|---|
| - Inventory properties | 416 | 412 | 413 |
| - Market value of the property portfolio | 50 610 | 47 312 | 48 964 |
| Total market value of the property portfolio | 51 026 | 47 724 | 49 377 |
| - Other interest bearing liabilities | 261 | 259 | 261 |
| - Net nominal interest bearing debt | 20 433 | 19 228 | 19 585 |
| Total net nominal interest bearing debt | 20 695 | 19 487 | 19 846 |
| All amounts in NOK million except ratio | 30.06.2020 | 30.06.2019 | 31.12.2019 |
INTEREST COVERAGE RATIO (ICR)
| All amounts in NOK million except ratio | Q2-20 | Q2-19 | YTD Q2-20 | YTD Q2-19 | 2019 |
|---|---|---|---|---|---|
| Net income | 349 | 484 | 744 | 880 | 1 780 |
| Depreciation | 1 | 2 | 3 | 4 | 8 |
| Results from associates and joint ventures | -1 | -132 | -39 | -155 | -312 |
| Net realised financials | 141 | 139 | 288 | 271 | 551 |
| EBITDA adjusted | 491 | 494 | 995 | 999 | 2 027 |
| Interest cost | 142 | 146 | 295 | 285 | 577 |
| Other finance expense | 7 | 5 | 12 | 11 | 28 |
| Applicable net interest cost | 149 | 151 | 307 | 296 | 606 |
| Interest Coverage Ratio (ICR) | 3.3 | 3.3 | 3.2 | 3.4 | 3.3 |
EPRA REPORTING
The following performance indicators have been prepared in accordance with best practices as defined by EPRA (European Public Real Estate Association) in its Best Practices Recommendations guide. The EPRA Best Practices Recommendations Guidelines focus on making the financial statements of public real estate companies clearer and more comparable across Europe. For further information about EPRA, see www.epra.com.
| Q2-20 / | Q2-19 / | |||
|---|---|---|---|---|
| Summary table EPRA performance measures | Unit | 30.06.2020 | 30.06.2019 | |
| A | EPRA earnings per share (EPS) | NOK | 1.38 | 1.39 |
| B | EPRA NRV per share | NOK | 161 | 150 |
| EPRA NAV per share | NOK | 156 | 145 | |
| EPRA NNNAV per share | NOK | 143 | 135 | |
| C | EPRA net initial yield | % | 4.8 | 4.8 |
| EPRA, "topped-up" net initial yield | % | 4.8 | 4.8 | |
| D | EPRA vacancy rate | % | 2.4 | 4.0 |
| E | EPRA cost ratio (including direct vacancy costs) | % | 19.2 | 14.4 |
| EPRA cost ratio (excluding direct vacancy costs) | % | 17.3 | 12.9 | |
The details for the calculation of the key figures are shown in the following tables:
A. EPRA EARNINGS
EPRA Earnings is a measure of the operational performance of the property portfolio. EPRA Earnings is calculated based on the income statement, adjusted for non-controlling interests, value changes on investment properties, changes in the market value of financial instruments and the associated tax effects. In addition, earnings from the jointly controlled entity OSU is adjusted for as the business of this company is development of properties for sale and is not considered relevant for measurement of the underlying operating performance of the property portfolio under management.
EPRA Earnings – Quarterly
| All amounts in NOK million | Q2-20 IFRS |
Q2-20 EPRA |
Q2-20 Non controlling |
Q2-20 EPRA |
Q2-19 IFRS |
Q2-19 EPRA |
Q2-19 Non controlling |
Q2-19 EPRA |
|---|---|---|---|---|---|---|---|---|
| reported | adjustments | Interests1) | Earnings | reported | adjustments | Interests1) | Earnings | |
| Rental income | 587 | 0 | 39 | 548 | 580 | 0 | 37 | 543 |
| Operating costs | -65 | 0 | -3 | -63 | -50 | 0 | -3 | -47 |
| Net operating income | 522 | 0 | 36 | 486 | 530 | 0 | 34 | 496 |
| Other revenue | 20 | 0 | 0 | 20 | 71 | 0 | 0 | 71 |
| Other costs | -14 | 0 | -2 | -12 | -67 | 0 | 0 | -67 |
| Administrative costs | -39 | 0 | -2 | -37 | -42 | 0 | -2 | -40 |
| Share of profit from associates and JVs | 1 | 1 | 0 | 0 | 132 | 133 | 0 | -1 |
| Net realised financials | -141 | 0 | -6 | -134 | -139 | 0 | -6 | -133 |
| Net income | 349 | 1 | 27 | 322 | 484 | 133 | 26 | 325 |
| Changes in value of investment properties | 619 | 619 | 0 | 0 | 472 | 472 | 0 | 0 |
| Changes in value of financial instruments | -28 | -28 | 0 | 0 | -19 | -19 | 0 | 0 |
| Profit before tax/EPRA Earnings before tax | 940 | 591 | 27 | 322 | 937 | 586 | 26 | 325 |
| Tax payable | -6 | 0 | -3 | -4 | -3 | 0 | -1 | -2 |
| Change in deferred tax | -204 | -134 | -3 | -67 | -171 | -97 | -4 | -70 |
| Profit for period/EPRA Earnings | 730 | 457 | 21 | 251 | 763 | 489 | 21 | 254 |
| Average outstanding shares (million) | 182.1 | 182.5 | ||||||
| EPRA Earnings per share | 1.38 | 1.39 |
1) Excluding non-controlling interests in relation to EPRA adjustments.
EPRA Earnings – Year to date
| All amounts in NOK million | YTD Q2-20 | YTD Q2-20 | YTD Q2-20 Non |
YTD Q2-20 | YTD Q2-19 | YTD Q2-19 | YTD Q2-19 Non |
YTD Q2-19 |
|---|---|---|---|---|---|---|---|---|
| IFRS reported |
EPRA adjustments |
controlling Interests1) |
EPRA Earnings |
IFRS reported |
EPRA adjustments |
controlling Interests1) |
EPRA Earnings |
|
| Rental income | 1 174 | 0 | 76 | 1 098 | 1 165 | 0 | 80 | 1 085 |
| Operating costs | -108 | 0 | -5 | -104 | -93 | 0 | -5 | -88 |
| Net operating income | 1 066 | 0 | 71 | 995 | 1 072 | 0 | 76 | 997 |
| Other revenue | 38 | 0 | 1 | 37 | 140 | 0 | 1 | 140 |
| Other costs | -23 | 0 | 0 | -23 | -128 | 0 | 0 | -127 |
| Administrative costs | -89 | 0 | -4 | -85 | -90 | 0 | -4 | -86 |
| Share of profit from associates and JVs | 39 | 0 | 0 | 39 | 155 | 153 | 0 | 2 |
| Net realised financials | -288 | 0 | -13 | -276 | -271 | 0 | -13 | -258 |
| Net income | 744 | 0 | 56 | 688 | 880 | 153 | 59 | 667 |
| Changes in value of investment properties | 619 | 619 | 0 | 0 | 956 | 956 | 0 | 0 |
| Changes in value of financial instruments | -365 | -365 | 0 | 0 | -41 | -41 | 0 | 0 |
| Profit before tax//EPRA Earnings before tax | 997 | 254 | 56 | 688 | 1 795 | 1 068 | 59 | 667 |
| Tax payable | -10 | 0 | -4 | -6 | -6 | 0 | -2 | -4 |
| Change in deferred tax | -206 | -52 | -8 | -146 | -318 | -165 | -10 | -143 |
| Profit for period/EPRA Earnings | 782 | 201 | 44 | 537 | 1 471 | 904 | 46 | 520 |
| Average outstanding shares (million) | 182.1 | 182.6 | ||||||
| EPRA Earnings per share | 2.95 | 2.85 |
1) Excluding non-controlling interests in relation to EPRA adjustments.
B. NET ASSET VALUE
Net Asset Value (NAV) is a key performance measure widely used in the real estate industry. In 2003, EPRA introduced its Best Practices Recommendations (BPR) guidelines for calculating NAV, with two NAV metrics: EPRA NAV and EPRA NNNAV. Since the introduction of EPRA NAV and EPRA NNNAV, European real estate companies have evolved into actively managed entities, including non-property operating activities, which has resulted in more active ownership, higher asset turnover, and balance sheet financing has shifted from traditional bank lending into capital markets. In the BPR guidelines released in October 2019, EPRA introduced three new Net Asset Valuation metrics: EPRA Net Reinstatement Value (NRV), EPRA Net Tangible Assets (NTA) and EPRA Net Disposal Value (NDV). Entra presents EPRA NAV, EPRA NNNAV and EPRA NRV.
EPRA NAV AND EPRA NNNAV
The objective with EPRA NAV is to demonstrate the fair value of net assets given a long-term investment horizon. EPRA NAV is calculated as net asset value adjusted to include market value of all properties in the portfolio, and to exclude certain items not expected to crystallise in a long-term investment property business model such as e.g. financial derivatives and deferred tax on the market value of investment properties.
The objective with EPRA NNNAV is to report the fair value of net assets in the Group on the basis that these are immediately realised. EPRA NNNAV is EPRA NAV adjusted to reflect the fair value of debt and derivatives and in order to include deferred tax on value changes.
| All amounts in NOK million | 30.06.2020 | 30.06.2019 | 31.12.2019 |
|---|---|---|---|
| IFRS equity attributable to shareholders | 22 874 | 21 397 | 22 570 |
| Add: Adjustment to property portfolio | 0 | 0 | 0 |
| Add: Revaluation of investments made in JVs | 374 | 584 | 400 |
| Add: Net market value on financial derivatives | 433 | 154 | 68 |
| Add: Deferred tax arising on revaluation moments | 4 663 | 4 329 | 4 517 |
| EPRA NAV | 28 344 | 26 464 | 27 555 |
| Market value on property portfolio | 50 610 | 47 312 | 48 964 |
| Tax value on property portfolio | 19 621 | 18 198 | 18 944 |
| Basis for calculation of tax on gain on sale | 30 989 | 29 114 | 30 021 |
| Less: Market value of tax on gain on sale (5% tax rate) | 1 549 | 1 456 | 1 501 |
| Net market value on financial derivatives | 433 | 154 | 68 |
| Tax expense on realised financial derivatives | 95 | 34 | 15 |
| Less: Net result from realisation of financial derivatives | 338 | 120 | 53 |
| Market value of interest bearing debt1) | 21 149 | 19 719 | 20 212 |
| Carrying value of interest bearing debt | 20 695 | 19 441 | 19 901 |
| Basis for calculation of tax on realisation of interest bearing debt | 454 | 278 | 311 |
| Market value of tax on realisation | 100 | 61 | 68 |
| Less: Net result from realisation of interest bearing debt | 354 | 217 | 242 |
| Less: MV of tax on gain on sale (5% tax rate) & realisation of financial derivatives in JVs | 64 | 93 | 93 |
| EPRA NNNAV | 26 039 | 24 577 | 25 666 |
| Outstanding shares at period end (million) | 182.1 | 182.1 | 182.1 |
| EPRA NAV per share (NOK) | 156 | 145 | 151 |
| EPRA NNNAV per share (NOK) | 143 | 135 | 141 |
1) The market value of interest bearing debt was in the report for Q4 2019 reported as 19,910 million, resulting in a reported EPRA NNNAV of 25,901 million (142 per share). The calculation of EPRA NNNAV for Q4 2019 was updated from the 2019 annual report.
EPRA NET REINSTATEMENT VALUE (NRV)
The objective of the EPRA NRV measure is to highlight the value of net assets on a long-term basis and assumes that no selling of assets takes place. Assets and liabilities that are not expected to crystallise in normal circumstances such as the fair value movements on financial derivatives and deferred taxes on property valuation surpluses are therefore excluded. Real estate transfer taxes are generally not levied on property transactions in Norway, and such taxes are accordingly not included in the gross value in Entra's valuation certificates. Consequently, no adjustment is done for real estate transfer taxes in the calculation of NRV.
| All amounts in NOK million | 30.06.2020 | 30.06.2019 | 31.12.2019 |
|---|---|---|---|
| IFRS equity attributable to shareholders | 22 874 | 21 397 | 22 570 |
| Add: Adjustment to property portfolio | 0 | 0 | 0 |
| Add: Revaluation of investments made in JVs | 374 | 584 | 400 |
| Net asset value at fair value | 23 248 | 21 980 | 22 971 |
| Add: Deferred tax in relation to properties and financial instruments | 5 735 | 5 338 | 5 529 |
| Add: Net fair value on financial derivatives | 433 | 154 | 68 |
| Less: Goodwill as a result of deferred tax | 109 | 109 | 109 |
| EPRA NRV | 29 306 | 27 364 | 28 458 |
| Outstanding shares at period end (million) | 182.1 | 182.1 | 182.1 |
| EPRA NRV per share (NOK) | 161 | 150 | 156 |
Bridge to EPRA NAV:
| EPRA NRV | 29 306 | 27 364 | 28 458 |
|---|---|---|---|
| Difference in adjustment for deferred tax1) | -1 072 | -1 009 | -1 012 |
| Goodwill as a result of deferred tax excluded from NRV, not from NAV | 109 | 109 | 109 |
| EPRA NAV | 28 344 | 26 464 | 27 555 |
1) For the calculation of EPRA NRV, adjustment is made for all deferred taxes in relation to properties and financial instruments. For the calculation of EPRA NAV, adjustment is made for the difference between deferred tax as per the IFRS balance sheet and the balance sheet as per the underlying tax filings.
C. EPRA NET INTIAL YIELD
EPRA Net initial yield measures the annualised rental income based on the cash rents passing at the balance sheet date, less nonrecoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers' costs.
EPRA "topped-up" net initial yield incorporates an adjustment to the EPRA NIY in respect of the expiration of rent-free periods (or other unexpired lease incentives such as discounted rent periods and step rents).
| All amounts in NOK million | Oslo | Trondheim | Sandvika | Stavanger | Drammen | Bergen | Total |
|---|---|---|---|---|---|---|---|
| Investment property - wholly owned | 32 799 | 5 023 | 3 039 | 1 296 | 274 | 2 214 | 44 644 |
| Investment property - share of JVs/Funds | 0 | 0 | 0 | 557 | 1 149 | 1 469 | 3 175 |
| Total property portfolio | 32 799 | 5 023 | 3 039 | 1 852 | 1 423 | 3 682 | 47 819 |
| Less projects and land and developments | -5 205 | -204 | -18 | -94 | 0 | -262 | -5 783 |
| Completed management portfolio | 27 594 | 4 820 | 3 021 | 1 758 | 1 423 | 3 420 | 42 035 |
| Allowance for estimated purchasers' cost | 54 | 15 | 10 | 4 | 5 | 8 | 96 |
| Gross up completed management portfolio valuation |
27 648 | 4 835 | 3 030 | 1 762 | 1 428 | 3 428 | 42 131 |
| 12 months rolling rent | 1 370 | 283 | 174 | 110 | 84 | 162 | 2 183 |
| Estimated ownership cost | 102 | 17 | 9 | 9 | 5 | 15 | 157 |
| Annualised net rents | 1 268 | 266 | 165 | 101 | 79 | 146 | 2 025 |
| Add: Notional rent expiration of rent free periods or other lease incentives |
0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Topped up net annualised net rents | 1 268 | 266 | 165 | 101 | 79 | 146 | 2 025 |
| EPRA NIY (net initial yield) | 4.6% | 5.5% | 5.5% | 5.7% | 5.5% | 4.3% | 4.8% |
| EPRA "topped-up" NIY (net initial yield) | 4.6% | 5.5% | 5.5% | 5.7% | 5.5% | 4.3% | 4.8% |
D. EPRA VACANCY
Estimated Market Rental Value (ERV) of vacant space divided by ERV of the whole portfolio. All figures are adjusted for actual share of ownership of each property.
| All amounts in NOK million | Oslo | Trondheim | Sandvika | Stavanger | Drammen | Bergen | Total |
|---|---|---|---|---|---|---|---|
| Market rent vacant areas | 39 | 10 | 0 | 1 | 2 | 3 | 55 |
| Total market rent | 1 486 | 280 | 154 | 98 | 84 | 212 | 2 316 |
| Vacancy | 2.6% | 3.5% | 0.1% | 0.7% | 2.1% | 1.6% | 2.4% |
E. EPRA COST RATIO
Administrative & operating costs (including & excluding costs of direct vacancy) divided by gross rental income.
| All amounts in NOK million | Q2-20 | Q2-19 | YTD Q2-20 | YTD Q2-19 | 2019 |
|---|---|---|---|---|---|
| Operating costs | -65 | -50 | -93 | -93 | -189 |
| Administrative costs | -50 | -42 | -90 | -90 | -171 |
| Share of joint ventures expences | 0 | 0 | 0 | 0 | 0 |
| Less: Ground rent cost | 2 | 2 | 5 | 4 | 9 |
| EPRA Cost (including direct vacancy cost) | -113 | -90 | -178 | -179 | -351 |
| Direct vacancy cost | -11 | -13 | -12 | -22 | -38 |
| EPRA Cost (excluding direct vacancy cost) | -102 | -77 | -167 | -158 | -313 |
| Gross rental income less ground rent | 587 | 580 | 1 181 | 1 165 | 2 338 |
| Share of joint ventures and fund (GRI) | 0 | 0 | 0 | 0 | 0 |
| Total gross rental income less ground rent | 587 | 580 | 1 181 | 1 165 | 2 338 |
| Epra cost ratio (including direct vacancy cost) | 19.2% | 15.5% | 15.1% | 15.4% | 15.0% |
| Epra cost ratio (excluding direct vacancy cost) | 17.3% | 13.3% | 14.1% | 13.5% | 13.4% |
DEFINITIONS
| 12 months rolling rent | - The contractual rent of the management properties of the Group for the next 12 months as of a certain date, adjusted for (i) signed new contracts and contracts expiring during such period, (ii) contract based CPI adjustments based on Independent Appraisers' CPI estimates and (iii) the Independent Appraisers' estimates of letting of current and future vacant areas. |
|---|---|
| Capital expenditure | - Property related capital expenditure, split into four components: (i) Acquisition, (ii) Development, (iii) Like-for-like portfolio and (iv) Other. The components Development and Like-for-like portfolio combined ties to the line item Investment in the property portfolio in the investment properties rollforward, while the two other categories ties to separate line items in the rollforward. |
| Back-stop of short-term interest bearing debt |
- Unutilised credit facilities divided by short-term interest bearing debt. |
| Cash Earnings | - Net income from property management less tax payable |
| Contractual rent | - Annual cash rental income being received as of relevant date |
| Gross yield | - 12 months rolling rent divided by the market value of the management portfolio |
| Interest Coverage Ratio ("ICR") | - Net income from property management excluding depreciation and amortisation for the Group, divided by net interest on interest bearing nominal debt and fees and commitment fees related to investment activities |
| Independent Appraisers | - Akershus Eiendom/JLL and Newsec |
| Land and dev. properties | - Property / plots of land with planning permission for development |
| Like-for-like | - The percentage change in rental income from one period to another given the same income generating property portfolio in the portfolio. The figure is thus adjusted for purchases and divestments of properties and active projects |
| Loan-to-value ("LTV") | - Total net nominal value of interest bearing debt divided by the total market value of the property portfolio. |
| Management properties | - Properties that are actively managed by the company |
| Market rent | - The annualised market rent of the management properties, fully let as of the relevant date, expressed as the average of market rents estimated by the Independent Appraisers |
| Market value of portfolio | - The market value of all properties owned by the parent company and subsidiaries. The figure does not include Inventory properties. |
| Net income from property | - Net income from property management is calculated as Net Income less value changes, tax effects and other income and other |
| management | cost from associates and JVs |
| Net letting | - Net letting is calculated as the annualised rent of new lease contracts plus lease-up on renegotiated contracts less terminated |
| contracts | |
| Net nominal interest bearing debt | - Nominal interest bearing debt less cash and bank deposits |
| Net rent | - 12 months rolling rent less the Independent Appraisers' estimate of ownership costs of the management properties of the Group |
| Net yield | - Net rent divided by the market value of the management properties of the Group |
| Occupancy | - Estimated market rent of occupied space of the management properties, divided by the market rent of the total space of the management portfolio. |
| Outstanding shares | - The number of shares registered with a deduction for the company's own repurchased shares at a given point in time. EPRA Earnings and Cash Earnings per share amounts are calculated using the weighted average number of ordinary shares outstanding during the period. All other per share amounts are calculated using the number of ordinary shares outstanding at period end. |
| Period-on-period | - Comparison between one period and the equivalent period the previous year |
| Property portfolio | - Properties owned by the parent company and subsidiaries, regardless of their classification for accounting purposes. Does not include the market value of properties in associates and jointly controlled entities |
| Project properties | - Properties where it has been decided to start construction of a new building and/or renovation |
| Total area | - Total area including the area of management properties, project properties and land / development properties |
| Total net nominal interest bearing | - Net nominal interest bearing debt and other interest bearing liabilities, including seller's credits and lease liabilities for land and |
| debt | parking lots in connection with the property portfolio |
| WAULT | - Weighted Average Unexpired Lease Term measured as the remaining contractual rent amounts of the current lease contracts of |
| the management properties of the Group, including areas that have been re-let and signed new contracts, adjusted for termination rights and excluding any renewal options, divided by Contractual rent, including renewed and signed new contracts. |
Contact info
Sonja Horn CEO Phone: + 47 905 68 456 [email protected]
Anders Olstad CFO Phone: + 47 900 22 559 [email protected]
Tone K. Omsted Head of IR Phone: + 47 982 28 510 [email protected]
Entra ASA Post box 52 Økern 0508 Oslo, Norway Phone: + 47 21 60 51 00 [email protected]
Financial calendar
Third quarter 2020 16.10.2020
Fourth quarter 2020 12.02.2021
Head office Biskop Gunnerus' gate 14 A 0185 Oslo, Norway
Postal address Post box 52 Økern 0508 Oslo, Norway
Phone: +47 21 60 51 00 [email protected]
Customer service centre Phone: +47 800 36 872 [email protected]
www.entra.no