Eik fasteignafélag — Management Reports 2021

Feb 11, 2021

Management results and budget

Management result 2020

According to management accounts for the year 2020 EBITDA for the year amounted to ISK 5,038 million which is in line with management's forecasts. The Company secured favourable financing of more than ISK 21 billion.

EBITDA for the year amounted to ISK 5,038 million according to dexed interest rates were 2.9%. Around one fifth of the Compamanagement accounts. These results are in line with the Compa- - ny's debt bears floating interest rates. ny's updated forecast which was announced on Nasdaq in June 2020. The Company's NO11 ratio was just under 67.2% for the year.

Operating income for the year 2020 amounted to ISK 8,345 mil- ing properties is lower economic lion. Of this amount, rental income was ISK 7,562 million which - occupancy rate and lower market rent. Most of the increase is increased by 2% between years. Other income including income - accounted for by new agreements, inflation, decrease in property relating to Hótel 1919 and income from common properties, taxes and lower WACC. amounted to ISK 783 million.

Office and administrative expenses amounted to ISK 446 million - which is next to Skeifan 7, another property owned by the Compaand was just under 5.9% of rental income. The Company's eco- ny. Both properties are within the same plot according to a recent nomic occupancy rate was 92% at the end of the year.

The Company's operating expenses amounted to a total of ISK 2,885 million for the year 2020. The Company's largest expense items are, as previously, property taxes, insurance and fees for water and waste, which amounted to a total of ISK 1,315 million. a development property. The Company sold one property, lárnlmpairment of receivables amounted to ISK 421 million. Net cash from operations amounted to ISK 1,858 million.

Economic effects of the COVID-19 pandemic on the Company's income statement can mainly be seen in impairment of receivables, decrease in economic occupancy rate and operating loss of Hótel 1919. The Company estimates that the pandemic has had a negative effect on EBITDA of more than ISK 655 million. Impairment of receivables amounted to ISK 375 million more than originally forecast, results of Hótel 1919 were lower by ISK 230 million than originally forecast and reduction in rentals amounted ISK 50 million.

The Company refinanced its debt amounting to just over ISK 21,000 million during the year and the Company's interest terms have never been better. At the end of the year the Company's weighted indexed interest rates were 3.15% and weighted unin-

Changes in value of investment properties amounted to ISK 594 million which is a real decrease of 2.9%. The largest items decreas-

The Company acquired one property during the year, Skeifan 9, framework planning by the City of Reykjavík regarding the Skeifan -area. With this acquisition, the Company has the opportunity to start a detailed land-use plan for the premises and subsequently develop it. The Company has hopes for options relating to the use of this plot in the near future. The Company classifies Skeifan 9 as háls 2, and recorded gain of sale amounted to ISK 150 million. The book value of the Company's properties amounted to ISK 100,316 million at year end.

The Company's equity ratio at year end was 31.3%, balance of cash and cash equivalents ISK 1,922 million, undrawn bank facilities amounted to ISK 1,560 million and the Company's unpledged properties were valued at just over ISK 6,300 million. The Company's position in relation to main financial covenants in loan agreements is strong. The Group's mortgage ratio is around 61.8% and the Company's cash flow obligation is around 2.2, but is reduced by one-time costs relating to payment of the bond class LF 14 1. Without those costs the ratio would be around 2.4.

These are unaudited management accounts which might change until the financial statements are published.

Management results - Income statement 2020

Lease income
Other operating income
Operating expenses Impairment of receivables
EBITDA
Gain (loss) on sale of investment properties Changes in value of investment properties Depreciation and impairment
Operating profit
Finance income Finance cost Net financial expense
Profit before income tax
Income tax
Profit for the year
Other profit
Operating items recorded in equity: Revaluation of real estate
Income tax of revaluation of real estate
Other profit total
Total profit for the period
Earnings per share:
Basic earnings and diluted earnings per share

1 In calculaing NOI ratio for the year, operating cost, taxes, depreciation, changes in fair value and rent (EBTDAR) as turnover ent are considered. Operating profit before changes in fair yalue and depreciation is divided into the total anount of rental income and Hótel 1995 EBTDAR.

		2020		2019
		7.562		7.393
		783 8.345		1.264 8.656
	(	2.885)	(	3.094)
	(	421)		O
		5.038		5.562
		152	(	3)
		594		2.170
	(	304)	(	165)
		5.480		7.564
		36		84
	(	4.439)	(	3.932)
	(	4.403)	(	3.848)
		1.076		3.716
	(	230)	(	748)
		846		2.968
	(	158)		O
		32		O
����������������������������������	(	126)		O
		720		2.968
		0,25		0,86

Management results - Balance sheet 2020

	2020	2019
Assets			Cash flows from operating activities
			Profit for the period
Intangible assets	351	433	Operating items which do not affect cash flow:
Investment properties	98.404	95.918	(Gain) loss on sale of investment properties
Assets in development	659	O	Valuation changes of investment properties
Assets for own use	3.789	4.068	Depreciation
Non-current receivables	83	46
Non-current assets	103.286	100.465	Change in operating assets
			Change in operating liabilities
Trade and other receivables	842	292
Cash and cash equivalents	1.922	1.837	Interest income received
Current assets	2.764	2.129	Interest expenses paid
			Net cash from op
Total assets	106.050	102.594	Cash flows used in investment activities
			Investment in investment properties
			Sold investment assets
Equity			Investment in assets for own use
			Sold assets for own use
Share capital	3.415	3.423	Changes in bond holdings
Share premium	12.648	12.687	Other recievables, change
Statutory reserve	866	866	Net cash used in in
Revaluation reserve	O	153	Cash flows (to) from financing activities
Restricted equity	6.016	5.182	New long-term debts
Retained earnings	10.255	10.242	Repayments and final payments of long-term loans
Total equity	33.200	32.552	Dividend paid
			Purchase of treasury shares
Liabilities			Short-term loans, change
			Net cash (to) from fir
Interest-bearing debt	60.500	58.364
Lease liabilities	2.28 /	2.038	Increase (decrease) in cash and cash equivalents
Income tax liability	7.445	7.252
Non-current liabilities	70.232	67.655	Cash and cash equivalents at beginning of year
Interest-bearing debt	1.501	1.416	Cash and cash equivalents at end of year
Trade and other payables	1.116	റ്ററു
Current liabilities	2.617	2.386
Total liabilities	72.850	/0.041
Total equity and liabilities	106.050	102.594

Management results - Cashflow statement 2020

5.480	7.564
ash flow:
152) roperties (	3
( 594) roperties (	2.170)
304	165
5.038	5.562
209) (	63
7	18
4.836	5.644
36	84
3.014) ( (	2.624)
Net cash from operating activities 1.858	3.104
2.573) ( (	1.558)
390	60
( 106) (	326)
ച	O
47) ( (	18)
390) ( (	50)
let cash used in investing activities 2.722) ( (	1.891)
a minuta minutun minutur minutur minutur minutur minutur manus manus manus manus manus manus manus manus manus manus manus manus manus manus manus manu manu manung manu manu
21.181 g-term loans 20.260)	18.861 18.451)
( ( ( O	1.016)
46) ( (	298)
75 (	319)
t cash (to) from financing activities 950 (	1.223)
( equivalents 86	10)
1.837 g of year	1.847
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The property portfolio of Eik at year end 2020

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Value of properties by location

• Central Reykjavík
• Financial & Commercial area, Reykjavík
• Reykjavík harbour
• Smárinn-Mjódd
• Outer areas of Reykjavík
• Outside captial area
• Other areas in capital area

Location of health related properties

■ Financial & Commercial area, Reykjavík ■ Other areas in capital area

• Central Reykjavík
• Smárinn-Mjódd
• Outer areas of Reykjavík

Industrial location

Financial budget 2021

Main presumptions of operating plan

There is still uncertainty regarding the effect of COVID-19 on the Icelandic economy and the Company estimates that the effect of the pandemic on the Company's operations will be extensive all through the year 2021. Due to uncertainties regarding the extent of the effect on the operations the Company publishes forecasted EBITDA instead of forecforecasted income and expenses. The Company retains the 3% forecast range used when the updated forecast was published in June 2020.

The Company forecasts that the Company's EBITDA will be in the range of ISK 5,050 to 5,350 million in the year 2021 considering 2.5% even inflation over the year, but in the range of ISK 4,975 to 5,275 million at fixed price levels.

The Company's rental income is estimated based on current lease agreements at the time the forecast is published, taking into considerations regarding changes in lease agreements within the year 2021. An income plan is prepared for each rental unit. Where lease agreements will expire within the year, market rent for the relevant rental unit is estimated and how promptly it can be expected that it will be leased again, if it is clear that the tenant is moving.

Operating income and operating expenses of common properties are recorded in the subsidiary Eik rekstrarfélag. Operating income of common properties is based on operaoperating cost of the relevant properties as it is meant to cover that cost. Hereunder fall for example expenses relating to energy, cleaning, snow removal, property management and administration. Rental income of common properties therefore increases and decredecreases in relation to the operating cost of common properties.

There is considerable uncertainty relating to forecast for the year for Hótel 1919. A baselbaseline forecast from Radisson Hotel Group for the period until May 2021 is used . The Company estimates that the loss for the year will be slightly less than in the last year. The main impetus for better results would be lifting of restrictions at Iceland's borders and concurrently increased inflow of tourists to the country. The Company uses the time during the pandemic for further refurbishments and construction has begun in the hotelhotel's lobby and restaurant.

There are several changes to the Company's large lease agreements. The Company signed new long-term lease agreements with Rikiseignir (Government property agency) on Borgartún 21 and Síminn on Múlastöð in the last year. Then there was also a new longterm lease agreement with Össur which entails an expansion of the Company's current property at Grjótháls 1 of 3,200 square meters as previously reported. Construction will commence in the first quarter of this year. Rúmfatalagerinn leases commercial premises from the Company both in Smáratorg 1 and Glerártorg, but Rúmfatalagerinn has annouannounced to the Company that it will not continue to lease in Glerártorg. The lease agreement will expire in mid-2021. The Company is already negotiating with a potential tenant of a part of that rental unit. In the late part of the year 2022 it is expected that Landsbankinn will move to new headquarters and therefore out of the units the bank has leased in Kvosin. Húsasmiðjan has announced to the company that it will not continue to lease the Company's properties in Akureyri and Selfoss when the lease agreements expire in late 2022.

The Company is looking into development of the properties, including with regards to a potential change in use, possible sale or to lease them in small units or as a whole. Monthly rent of Rúmfatalagerinn's premises at Glerártorg, Landsbankinn's headquarters and the previously mentioned properties leased by Húsasmiðan is around ISK 50 million. It is expected that long-term effects of these changes will be insignificant for the Company.

Maintenance. refurbishments and investments

The Company estimates that investments in the Company's current properties can amount to between ISK 1,500 million and ISK 2,300 million in the year 2021 and that rate of return of all investments will be acceptable for the Company.

The main projects will be the extension for Ossur at Grjotháls, alterations relating to the country's largest dental office in Álfheimar 74, refurbishment at the first floor of Hótel 1919, fixtures and renovation of Suðurlandsbraut 10 and changes for tenants at Smáratorg 1. Furthermore, there are ongoing discussions relating to additional investments in connection with new long-term lease agreements. It is expected that capitalised refurbishments will amount to around ISK 425 million in the year and capitalised maintenance around ISK 50 million.

The Company will continue to focus on rate of return rather than growth with relation to acquisition or sale of investment properties.

Eik fasteignafélag hf.