Quarterly Report • Oct 29, 2015
Quarterly Report
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Oslo Solar, under planning at Lilletorget 1 in Oslo
Entra ASA ("Entra", "the Group") is one of Norway's leading real estate companies, focusing on high quality, flexible office buildings with central locations. The company owns and manages 97 buildings with a total area of approximately 1.2 million square metres. Each day over 30,000 people work in buildings owned by Entra. As of 30.09.15 the real estate portfolio had a market value of around NOK 29 billion. The public sector represents approximately 72 per cent of the total customer portfolio.
Entra's business concept is to develop, let and manage attractive and environmentally leading buildings, as well as engaging in active portfolio management through the purchase and sale of properties. Entra's business strategy has three pillars: customer satisfaction, profitable growth and environmental leadership.
Entra works continuously to maintain customer satisfaction. Close customer contact and a bespoken customer service centre are important factors in achieving this. Figures from the Norwegian Tenant Survey show that in 2014 Entra achieved an aggregate customer satisfaction rating of 74, against an industry average of 72. The result for 2014 is an improvement compared to 2013.
In addition Entra has high ambitions with regard to the environment and works to reduce total energy consumption in the property portfolio. A reduction in energy consumption in the property portfolio of more than 20 per cent since 2007 shows that this work is giving results. Important quality criteria for Entra's new buildings are to achieve a passive building standard and BREEAM classification "Excellent", and to use environmentally efficient building materials.
Entra's strategic areas are Oslo and the surrounding region, Bergen, Stavanger and Trondheim. The company is organised into four regions: Central Oslo, Greater Oslo, South/West Norway and Mid/North Norway. Entra has its head office in Oslo and also has regional offices in Bergen and Trondheim.
Entra is listed on Oslo Stock Exchange with the ticker ENTRA. In addition, the subsidiary Entra Eiendom AS has issued bonds and commercial paper which are listed on Oslo Stock Exchange under the ticker ENEID.
| Q3-15 | Q3-14 | YTD Q3-15 | YTD Q3-14 | 2014 | |
|---|---|---|---|---|---|
| Operational | |||||
| Market value of real estate portfolio (NOKm) | 28,756 | 27,748 | 28,756 | 27,748 | 28,358 |
| Total area (Gross sqm) | 1,198,456 | 1,301,499 | 1,198,456 | 1,301,499 | 1,292,107 |
| Occupancy rate of management portfolio (%) | 94.5 | 94.1 | 94.5 | 94.1 | 94.6 |
| WAULT (years) | 7.4 | 7.7 | 7.4 | 7.7 | 7.7 |
| Financial | |||||
| Rental income (NOKm) | 459 | 448 | 1,322 | 1,323 | 1,772 |
| Profit before value adjustments and tax (NOKm) | 245 | 207 | 606 | 622 | 790 |
| Profit after tax (NOKm) | 495 | 374 | 1,950 | 689 | 1,000 |
| EPRA Earnings (NOKm)* | 155 | 131 | 455 | 416 | 555 |
| Net cash flow from investment activities (NOKm) | -191 | -438 | 1,052 | -953 | -1,157 |
| Net nominal interest-bearing debt (NOKm) | 12,843 | 15,835 | 12,843 | 15,835 | 13,890 |
| Debt ratio (LTV) (%)* | 43.9 | 56.3 | 43.9 | 56.3 | 48.4 |
| Interest coverage ratio (ICR) (%)* | 2.9 | 2.2 | 2.6 | 2.1 | 2.0 |
| Equity ratio (%) | 40.5 | 29.5 | 40.5 | 29.5 | 35.9 |
| Net asset value - EPRA NAV (NOKm)* | 15,626 | 11,846 | 15,626 | 11,846 | 14,029 |
| EPRA NNNAV (NOKm)* | 14,254 | 10,531 | 14,254 | 10,531 | 12,531 |
| Cash earnings (NOKm)/* | 258 | 193 | 692 | 581 | 754 |
| Numbers per share* | |||||
| Earnings (NOK) | 2.5 | 2.7 | 10.2 | 4.8 | 5.6 |
| EPRA Earnings (NOK) | 0.8 | 0.9 | 2.5 | 2.9 | 3.0 |
| Cash earnings (NOK)/* | 1.4 | 1.4 | 3.8 | 4.1 | 4.1 |
| Net asset value - EPRA NAV (NOK) | 85.0 | 83.3 | 85.0 | 83.3 | 76.4 |
| EPRA NNNAV (NOK) | 77.6 | 74.1 | 77.6 | 74.1 | 68.2 |
| Number of shares (million) | 183.7 | 142.2 | 183.7 | 142.2 | 183.7 |
* See section "Calculation of key figures and definitions"
** Cash earnings in 2015 has been adjusted by NOK 115m due to termination of swap contracts in Q2-2015. The termination fee is defined as a one-off item and will thus not reduce cash earnings as a basis for dividend for 2015.
The Group's rental income was NOK 459 million in the third quarter of 2015 compared to NOK 448 million in the same period in 2014. The increase is impacted by a rent compensation of NOK 30 million in relation to the termination of a lease contract in Langkaia 1. Adjusted for this compensation the rental income decreased by NOK 19 million. The decrease is explained by the sales of non-core assets in Q4 2014 and Q1 2015, partly offset by rental income from completion of development projects in Schweigaards gate 16 and Papirbredden 3 in Drammen. Underlying like-for-like growth on the lease contracts was 2.1 per cent from Q3 2014 to Q3 2015.
Other operating revenue amounted to NOK 20 million, compared to NOK 40 million in the same period in 2014. The reduction is a result of lower sales of apartments in Q3 2015 compared to the same quarter last year. During the quarter the company had NOK 11 million in income from the project at Ringstabekk, mainly related to the sale and handover of 2 apartments. In addition, other operating income consists of income from external services provided in the quarter.
Repairs and maintenance amounted to NOK 17 million (NOK 12 million) in the quarter.
Operating costs amounted to NOK 31 million (NOK 29 million) in the quarter. The Group has reclassified NOK 8 million of property management personnel costs from administrative owner costs to operating costs.
Other property costs amounted to a total of NOK 17 million (NOK 33 million) and were affected by costs of NOK 11 million related to the apartments sold at Ringstabekk (referred to above). Otherwise other property costs are mainly related to depreciation and rental expenses.
Administrative owner costs amounted to NOK 36 million (NOK 48 million). The reduction is a result of streamlining of the cost base and NOK 8 million being reclassified to operating costs as mentioned above.
The net income from property management amounted to NOK 378 million (NOK 366 million) in the third quarter of 2015.
The valuation of the property portfolio resulted in a net positive value change of NOK 522 million, compared to NOK 365 million in the third quarter of 2014. The positive value change is mainly attributable to a yield reduction for centrally located properties in Oslo, signing of new and renegotiated lease contracts and the effect from the forward sale of the development project "Gullfaks" at Hinna Park of NOK 67 million.
Share of profit from associates and jointly controlled entities was NOK -13 million (NOK 14 million) in the quarter. The decrease is impacted by a negative value change due to revised assumptions in the project in MediaCity Bergen offset by a positive value change due to a new lease contract in Sundtkvartalet.
Net realised financial expenses amounted to NOK 120 million (NOK 173 million). The underlying reduction in realised financial expenses results from the Group having reduced its borrowings compared to Q3 2014. In addition, lower market interest rates on floating rate debt and the expiry and termination of high interest rate hedging agreements has contributed to lower realised financial expenses.
The net unrealised value change on financial instruments was NOK -86 million in the quarter versus NOK -44 million in Q3 2014. The negative development is mainly due to lower long-term market interest rates in the quarter somewhat offset by lower interest bearing debt due to increased credit margins on the fixed rate bonds.
The profit before tax was NOK 681 million (NOK 528 million) in the third quarter of 2015, while total comprehensive income after tax in the period was NOK 495 million (NOK 374 million).
The Group's assets amounted to NOK 31,027 million (NOK 29,944 million) as at 30.09.15. Of this, investment property amounted to NOK 28,093 million (NOK 27,288 million) and investment property held for sale to NOK 150 million (NOK 260 million). One property is classified as held for sale as of 30.09.15.
Investments in associated companies and jointly controlled entities were NOK 1,121 million (NOK 1,076 million).
Property and housing units for sale was NOK 557 million (NOK 279 million) in the quarter mainly impacted by reclassification of the property "Gullfaks" at Hinna Park following the forward sale of the property.
The Group's interest-bearing debt as of 30.09.15 was NOK 13,421 million (NOK 16,344 million). Since 30.09.14 the Group has decreased its interest-bearing debt primarily as a result of the IPO in October 2014 and the sale of investment properties in Q4 2014 and Q1 2015.
The pension liability was NOK 74 million (NOK 65 million) at the end of the third quarter. The increase is due to changes in actuarial assumptions, particularly impacted by a higher discount rate on the pension liability.
Trade payables and other payables were NOK 283 million (NOK 524 million). As of 30.09.14 the amount was impacted by interests due on interest bearing debt, approved not paid dividend payments and other short-term accruals.
The Group's equity capital, including non-controlling interests, was NOK 12,553 million (NOK 8,828 million) as at 30.09.15 which corresponds to an equity ratio of 40.5 per cent (29.5 per cent). The strengthened equity is a result of the IPO in October 2014 as well as the results for the first nine month of 2015 The decrease in non-controlling interests from NOK 383 million at 30.09.14 to NOK 350 at 30.09.15 is mainly explained by capital decrease of NOK 85 million in Hinna Park Eiendom in 2014, partly offset by share of profit 2015.
The Group's cash flow from operations amounted to NOK 264 million (NOK 124 million) in the third quarter mainly due to positive change in working capital.
Net cash flow from investments was NOK -191 million (NOK -438 million).
Proceeds from sales of investment properties, companies and housing-units was NOK 14 million (NOK 65 million) and mainly consists of proceed from the sale of housingunits at Ringstabekk.
Cost of upgrades of investment properties amounted to NOK -217 million (NOK -236 million) in the third quarter of 2015.
Furthermore, the Group has invested NOK 14 million in the jointly controlled entity Entra OPF in the quarter.
Net cash flow from financing was NOK 12 million (NOK 245 million) in the quarter mainly related to a net repayment of commercial paper loans of a total of NOK 500 million and a net increase in refinanced bank loans of NOK 528 million.
The net change in liquid assets was NOK 85 million (NOK -69 million) during the period.
During the third quarter, the Group has issued commercial paper loans of NOK 300 million. The Groups bank debt has increased with NOK 528 million in the quarter, of which NOK 500 million is due to a reduction of commercial paper financing.
The Group's nominal interest-bearing debt was NOK 13,001 million as at 30.09.15 (NOK 15.976 million as at 30.09.14), with a diversified maturity profile. The average remaining term of the Group's debt portfolio was 4.6 years at 30.09.15 (4.5 years as at 30.09.14). The calculation takes into account that available long-term credit facilities can replace short-term debt.
| NOK in millions | Credit line Share of total debt | Acc. Share of total debt |
|
|---|---|---|---|
| 0-3 months | 1,800 | 6% | 6% |
| 4-12 months | - | 12% | 18% |
| 1-2 years | 3,822 | 24% | 42% |
| 2-4 years | 3,390 | 24% | 66% |
| 4-6 years | 1,516 | 13% | 79% |
| >6 years | 2,474 | 21% | 100% |
| Total | 13,001 |
The Group's liquid assets as at 30.09.15 amounted to NOK 158 million (NOK 141 million as at 30.09.14). The Group has unutilised credit facilities totalling NOK 3,690 million as at 30.09.15 (NOK 3,733 million as at 30.09.14).
| NOK in millions | Amount | Share |
|---|---|---|
| 0-3 months | - | 0% |
| 4-12 months | 750 | 20% |
| 1-2 years | - | 0% |
| 2-4 years | 2,838 | 77% |
| 4-6 years | 102 | 3% |
| >6 years | - | 0% |
| Total | 3,690 |
The chart above shows the composition of interest-bearing debt. At the end of the period 64 per cent of the Group's financing was from the capital market.
62 per cent of the Group's financing was hedged at a fixed interest rate as at 30.09.15. The weighted effective maturity of the fixed rate portion was 3.4 years as at 30.09.15 (3.0 years as at 30.09.14).
The Group's average interest rate was 3.90 per cent as at 30.09.15, down from 3.95 per cent as at 30.06.15. The decrease in the average interest rate is mainly due to lower market interest rates.
The Group's interest-bearing debt is subject to variable interest rate, including fixed rate bonds, which are swapped to variable rate. The Group manages interest rate risk by entering into floating-to-fixed interest rate swaps.
The table below shows the maturity profile and contribution from floating-to-fixed interest rate swaps used for hedging purposes, as well as maturity profile for credit margins on debt
| The Group's average interest rate | % |
|---|---|
| Swap interest rate (net) | 1.71 |
| NIBOR on debt | 1.21 |
| Credit margin on debt | 0.98 |
| Total | 3.90 |
| Pay fixed / receive floating swaps¹ | Forward starting swaps² | Average credit margin on debt |
|||||
|---|---|---|---|---|---|---|---|
| Amount (NOKm) |
Interest rate (%) |
Amount | Interest rate (%) |
Tenor (years) |
Amount (NOKm) |
Credit margin (%) |
|
| <1 year | 100 | 2.38 | 500 | 2.83 | 8 | 5,301 | 0.95 |
| 1-2 years | 152 | 3.57 | 2,300 | 1.13 | |||
| 2-3 years | 1,810 | 3.89 | 900 | 2.33 | 7 | 1,700 | 1.11 |
| 3-4 years | 1,000 | 4.05 | 100 | 2.27 | 7 | 500 | 0.64 |
| 4-5 years | 2,100 | 3.94 | 1,200 | 1.22 | |||
| 5-6 years | 950 | 4.86 | - | - | |||
| 6-7 years | 350 | 3.36 | 400 | 0.59 | |||
| 7-8 years | 350 | 4.76 | 500 | 1.63 | |||
| 8-9 years | 400 | 2.56 | - | - | |||
| 9-10 years | - | - | - | - | |||
| >10 years | 510 | 5.36 | 1,100 | 0.39 | |||
| Total | 7,722 | 4.06 | 13,001 | 0.98 | |||
| Pay fixed | 7,722 | 4.06 | |||||
| Receive float | -7,722 | 1.18 | |||||
| Swap interest rate (net) | 2.88 | ||||||
Hedge ratio adjusted rate³ 1.71
¹Excluding forward starting swaps.
²The table displays future starting point, notional principle amount, average fixed rate and tenor for forward starting swaps. ³Hedge ratio = outstanding notional principal amount (swaps) / nominal interest bearing debt.
At the end of the third quarter the Group had an economic occupancy rate in the management portfolio of 94.5 per cent (94.1 per cent). The weighted remaining term for the Group's leases was 7.4 years for the management portfolio, and 7.5 years when the project portfolio is included.
During the third quarter Entra signed new and renegotiated leases with an annual rent totalling NOK 94 million (45.250 square metres) and received notices of termination on leases with an annual rent of NOK 19 million (11.500 square metres). The increase in rent from the total amount of renegotiated contracts signed within the quarter was about 7.4 %.
The largest new/renegotiated leases entered into in the quarter were:
Renegotiated contract for 12 years (2 years extension) and 16,700 sqm at Grønland 58 in
Drammen with Buskerud and Vestfold University College
The maturity structure of the Group's lease portfolio is set out in the graph below.
| Number of | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Area | Occupancy | properties | Wault | Market value 12 month rolling rent |
Net yield | Market rent | |||||
| (sqm) | (%) | (#) | (year) | (NOKm) (NOK/sqm) | (NOKm) (NOK/sqm) | (%) | (NOKm) (NOK/sqm) | ||||
| Region Central Oslo | 416,064 | 94.5 | 30 | 6.5 | 14,481 | 34,804 | 866 | 2,083 | 5.6 | 901 | 2,164 |
| Region Greater Oslo | 253,241 | 94.5 | 25 | 9.5 | 6,047 | 23,878 | 391 | 1,544 | 6.0 | 350 | 1,384 |
| Region South/West | 184,591 | 94.3 | 21 | 7.7 | 3,786 | 20,508 | 271 | 1,467 | 6.5 | 278 | 1,507 |
| Region Mid/North | 135,217 | 94.8 | 12 | 6.8 | 2,566 | 18,977 | 191 | 1,412 | 6.6 | 189 | 1,395 |
| Total management portfolio | 989,112 | 94.5 | 88 | 7.4 | 26,879 | 27,175 | 1,719 | 1,738 | 5.9 | 1,718 | 1,737 |
| Project portfolio | 79,633 | 3 | 12.4 | 1,428 | 17,934 | ||||||
| Regulated development sites | 129,711 | 6 | 0.2 | 449 | 3,461 | ||||||
| Total property portfolio | 1,198,456 | 97 | 7.5 | 28,756 | 23,994 |
Ringstabekk housing project is included in market value of management portfolio at cost price of NOK 28 million.Youngsgt. 7-9 is included in market value of management portfolio at sales price of NOK 60 million. The calculation of net yield is based on the valuers' assumption of ownership costs, which at 30.09 corresponds to 7.6 per cent of market rent.
In Q3 2015 Entra has sold the property Kirkegaten 2B in Arendal for NOK 33 million. Closing took place on 30.09.15.
In July Wintershall called their option to acquire the property project Gullfaks in Stavanger when finalised in Q3 2016 for an estimated transaction price of NOK 711 million. Gullfaks is a 17,900 sqm office building under construction at Hinna Park in Stavanger. In addition to the office building the transaction will also include part of an underground car park. The property is 50 % owned by Entra through Hinna Park Eiendom AS
| Project | Ownership (%) |
Location | Expected completion |
Project area ('000 sqm) |
Occupancy % |
Estimated total project cost* (NOKm) |
Of which accrued* (NOKm) |
Yield on cost** |
|---|---|---|---|---|---|---|---|---|
| Group: | ||||||||
| Papirbredden 3 | 60 Drammen | Oct-15 | 11,400 | 59 | 266 | 230 | 8.1 | |
| Fredrik Selmers vei 4 (phase 2) | 100 Helsfyr | Jan-16 | 7,400 | 52 | 212 | 166 | 6.7 | |
| Strømsveien 96 | 100 Helsfyr | Dec-16 | 18,100 | 46 | 433 | 139 | 6.6 | |
| Total Group | 36,900 | 911 | 535 | |||||
| Jointly controlled companies: | ||||||||
| Sundtkvartalet | 50 Oslo | Dec-16 | 31,300 | 45 | 1,055 | 562 | 6.7 | |
| MediaCity Bergen | 50 Bergen | Aug-17 | 45,000 | 61 | 1,677 | 824 | 6.1 | |
| Total Jointly controlled companies | 76,300 | 2,733 | 1,386 | |||||
| Forward sold property projects: | ||||||||
| Gullfaks*** | 50 Stavanger | Aug-16 | 17,900 | 100 | 539 | 420 | 6.7 | |
| Total Forward sold projects | 17,900 | 539 | 420 |
Ongoing projects with a total investment exceeding NOK 50 million are presented below.
* Total project cost (Including book value at date of investment decision/cost of land)
** Estimated net rent (fully let) at completion/total project cost (including cost of land)
*** Gullfaks; Occupancy is reported as 100 % let due to a rental guarantee included in the purchase transaction of Hinna Park AS
Papirbredden 3 is planned and constructed in accordance with FutureBuilt's quality criteria and will be a passive house with Energy class A. The main tenant, the Norwegian Housing Bank moved into the premises in August 2015. The remaining construction is ongoing and the project will be finalised in October 2015.
Phase two of the project in Fredrik Selmersvei 4 involves completing remaining interior works on 7,400 sqm in one of the blocks. The project will be completed in January 2016 and 3,700 sqm is let to Norwegian Tax Administration.
At Strømsveien 96 in Oslo the refurbishment of 18,000 square meters (12,500 sqm office) is ongoing and internal demolition has started. Norwegian Medicines Agency will be one of the tenants, letting approximately 6,500 square metres. The project aims to obtain a BREEAM Very Good classification and will obtain energy class B. The refurbishment will be completed in December 2016.
In Sundtkvartalet in Oslo, a new, environmentally leading office building of approximately 31,000 square metres is under construction. Assembling of precast concrete is currently ongoing. The ambition is to obtain a BREEAM Excellent classification, a passive house with energy class A. The project is organised through a joint venture where Skanska and Entra own 50 per cent each. Skanska is the building contractor and has also signed a lease for
approximately 8,000 square metres in the new property. Manpower Group has signed a lease for approximately 4,200 square metres.
In Lars Hilles gate 30 (MediaCity Bergen), internal demolition has been completed in two out of three towers. Assembling of precast concrete has started. This building comprises 45,000 square metres and will house the largest media companies in Bergen. The project will include the total renovation of the existing 35,000 square metres and an extension of 10,000 square metres. The vision behind the concept is to create an environment for innovation and knowledge development within the media industry, through establishing a cluster of media companies, technology, education and research. TV2, NRK, Bergensavisen, Bergens Tidene, the Media Faculty of Bergen University, and Vizrt have signed lease contracts. The property is 50 per cent owned by Entra through Entra OPF.
In July Wintershall called their option to acquire the property project Gullfaks in Stavanger when finalised in August 2016. Gullfaks is a 17,900 sqm office building under construction at Hinna Park in Stavanger. In addition to the office building the transaction will also include part of an underground car park. The transaction price is estimated to be around NOK 700 million. The property is 50 per cent owned by Entra through Hinna Park Eiendom AS.
Papirbredden Eiendom AS and Hinna Park Eiendom AS are consolidated in the Group's financial statements and Entra OPF Utvikling AS, Oslo S Utvikling AS and Sundtkvartalet Holding AS are accounted for applying the equity method.
Entra Eiendom AS and Drammen Municipality own Papirbredden Eiendom AS. The company owns the properties Grønland 51, Grønland 56, Grønland 58, Grønland 60 and Kreftingsgate 33 in Drammen. All the existing buildings are 100 per cent let.
The construction of Papirbredden 3 on parts of the site Grønland 51 in Drammen is ongoing.
Zoning work is continuing for the property Kreftingsgate 33 in Drammen.
Entra owns 50 per cent of the shares in Hinna Park Eiendom AS (since 1 February 2014). The remaining 50 per cent is owned by Camar Eiendom AS.
Hinna Park Eiendom AS owns the management properties Jåttåvågveien 18 (Troll), Jåttåvågveien 7 (Blokk C) and Laberget 22 (Fjordpiren) and the parking garage Gullhallen. Hinna Park Eiendom AS also owns the ongoing development project Gullfaks as described under the project development section above as well as development potential for two new office properties totalling around 29,300 sqm.
Entra and Oslo Pensjonsforsikring (OPF) own the jointly controlled entity Entra OPF Utvikling AS. The company owns the properties Lars Hilles gate 30 and Allehelgens gate 6 in Bergen.
The property Lars Hilles gate 30 is under development and is described under the project development section above. The property Allehelgens gate 6 is fully let to Hordaland politidistrikt.
According to the agreement between Entra and Oslo Pensjonsforsikring, Entra OPF Utvikling AS is not to be
financed with debt, and any capital requirements in addition to the company's ongoing profits are to be financed with equity contributions from the owners. In addition the contract provides that the company as a general rule will distribute the previous year's profit after providing for any capital requirements in the year in which the distribution is made.
Entra and Skanska Commercial Development Norway Holding AS own the jointly controlled entities Sundtkvartalet Holding AS. The company will build a new office building of approximately 31,000 square meters in Lakkegata/Vahlsgate.
OSU is a property development company that is undertaking the development of parts of the city district Bjørvika in Oslo. OSU is developing around 350,000 square metres above ground and around 105,000 square metres below ground, of which approximately 177,000 square metres above ground and approximately 70,000 square metres below ground has been developed.
OSU's strategy of developing properties for sale means that the properties are not recorded in the financial statements at fair value, but at historical cost. In the consolidated financial statements the investment is included using the equity method, and equity after tax is recorded at NOK 540 million in the consolidated financial statements as at 30.09.2015.
The market value of the properties and projects in OSU is estimated at approximately NOK 3.6 billion (100 per cent). Entra's ownership of 33.33 per cent gives a market value of NOK 1.2 billion. The estimate is based on corresponding principles to those used for Entra's other valuations of investment properties. Entra's share of the net asset value as at 30.09.2015 was NOK 762 million after taking into account estimated latent deferred tax of 10 per cent.
Commercial property transactions in Norway amounted to approximately NOK 65-70 billion during the first nine months of 2015. The transaction market is active and has been driven by favourable financing terms and low return on alternative investments. International investors are currently the largest net buyers of property in Norway. The foreign share of transaction values in the Norwegian property market has been around 50 per cent so far in 2015. The interest for modern and central properties close to transportation hubs is high but the demand surplus for Norwegian properties is pushing down yields also in other segments. Prime yield is now at around 4.2 per cent according to Entra's consensus report.
Source: Entra Consensus report
Office vacancy in the largest cities is increasing due to the current macro economic situation with lower oil prices and slower growth. The picture is mixed as vacancies and rent levels for modern and centrally located properties still remain stable. However, in the oil and gas dominated areas of the individual cities the vacancies are increasing and the rent levels decreasing.
In Oslo the office vacancy is expected to level out around current 8.6 per cent. The vacancy is expected to decrease from 2017 due to low levels of newbuilds and high conversion from commercial to residential buildings.
Rents for modern offices in the city centre remain stable around NOK 3,000 per square metre.
Office vacancy in Bergen has increased from around 8 per cent in Q2 to about 10 per cent in Q3. The increase is mainly seen in the oil and gas intensive areas at Sandsli and Kokstad. Rents for modern offices in central Bergen remain stable around NOK 2,200 per square metre.
In Trondheim, office vacancy has increased to around 9 per cent. The spread in rent levels are increasing. Rent levels outside the city centre are decreasing, while modern centrally located premises in Trondheim still obtain rents of approximately NOK 2,000 per square metre.
Office vacancy in Stavanger has increased to above 10 per cent. The oil and gas dominated Forus area is hit particularly hard. The rent level for high standard, modern office premises located in the city centre and at Hinna Park remains at around NOK 2,000 - 2,300 per square metre.
| 2012 | 2013 | 2014 | 2015e | 2016e | 2017e | |
|---|---|---|---|---|---|---|
| Vacancy (%)* | 7.2 | 7.4 | 7.8 | 8.6 | 8.6 | 8.2 |
| Rental price (NOK/sqm)** | 2,780 | 2,907 | 3,025 | 2,960 | 2,975 | 3,058 |
| Prime yield (%)* | 5.3 | 5.2 | 4.7 | 4.2 | 4.3 | - |
| * Oslo, including Lysaker and Fornebu ** High quality offices in Oslo |
Source: Entra Consensus report
At 30 September 2015 the Group had 162 employees, of whom 14 are employed in Hinna Park AS.
During the quarter there were two lost time injuries. Entra has implemented several initiatives to improve the 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 4.2 as at the end of the period, up from 3.6 at the end of the previous quarter.
The Group is exposed to financial risk through considerable level of debt financing, and changes in interest rate levels on loans at floating rates will affect the Group's cash flow. The risks associated with the development in market rates are managed through active use of interest hedging instruments. Liquidity/ refinancing risk is reduced by entering into long-term loan agreements and maintaining significant unutilised credit facilities, as well as through establishing a diversified maturity structure and the use of various credit markets and counterparties.
The Group's equity is affected by value changes on properties and financial instruments that are due to changes in, among other things, interest and rent levels, yields and other market conditions.
Entra is exposed to the letting market, which is affected by macroeconomic changes in, among other things, GDP, the CPI rate and employment. Vacancy in the portfolio and rent changes on renegotiation of existing contracts affect the ongoing cash flow. Efforts are made to reduce the letting risk by systematic customer service, following up contract expiries and plans for letting work, as well as by adapting properties to customers' requirements. By entering into long leases with a diversified maturity structure, the Group achieves a stable and predictable cash flow.
Due to recent political changes in the city council in Oslo, Entra will be exposed to property tax on all its properties in Oslo, effective from 2017.
Entra carries out major upgrading and development projects involving risks in relation to deadlines and costs.
There has for some time been a deviation between the rent adjustment on leases entered into (CPI) and the increase in building costs, a factor which it has been important to take into account when planning and implementing projects. This difference is expected to be less in the future.
There has been no significant events after the balance sheet date.
The 10 largest shareholders as registered in the VPS on 1 October 2015 were as follows:
| Shareholder | No of shares | % of total |
|---|---|---|
| Norwegian Ministry of Trade, Industry and Fisheries | 91 668 389 | 49.9 |
| Geveran Trading | 14 223 406 | 7.7 |
| Folketrygdfondet | 10 167 196 | 5.5 |
| State Street Bank (Nominee) | 4 077 100 | 2.2 |
| Danske Invest Norske | 3 946 358 | 2.2 |
| The Bank of New York (Nominee) | 3 394 617 | 1.9 |
| JP Morgan Bank Luxemburg (Nominee) | 3 249 778 | 1.8 |
| Danske Invest Norske | 2 315 214 | 1.3 |
| State Street Bank (Nominee) | 1 962 361 | 1.1 |
| Goldman Sachs & Co (Nominee) | 1 844 600 | 1.0 |
| SUM 10 LARGEST SHAREHOLDERS | 136 849 019 | 74.5 |
| TOTAL | 183 732 461 | 100.0 |
The current economic situation with lower oil prices is leading to higher unemployment, increased uncertainty and an overall weaker macro-economic development.
Office vacancies have continued to increase slightly despite the relatively low volume of new buildings being completed. Sub markets with a high level of oil sector exposure are experiencing increasing vacancies and pressure on rents whilst Entra is in a relatively good position having long lease contracts with solid tenants and a low exposure towards the oil sector. Particularly in Oslo that constitutes some 60% of Entra's revenues, we expect the level of vacancies to improve as net new office space coming into the market during 2016 and 2017 is marginal due to low levels of newbuilds and high conversion from commercial to residential buildings.
Modern offices located near public transportation still attract tenants and obtain solid rents compared to premises located in less central areas. Market rent levels have decreased slightly in 2015 but one expects a positive trend from 2016 and onwards driven primarily by limited new capacity.
The newly elected ruling coalition in Oslo have declared that cars will be banned from downtown Oslo by 2019 and that a property tax will be introduced in 2017. The banning of cars from city centers is a trend seen in other European cities and, given Entra's strategy of being close to communication hubs with limited reliance on car
transportation and parking, it could actually benefit the company. Whilst there is considerable uncertainty regarding the basis for property tax, it will have a negative impact on the company at least in the short run when Entra will bear the costs. However, it is difficult to assess the financial consequences given the limited information available.
The credit market environment has become less favourable during Q3 as credit margins have risen. However, credit markets are still favourable for property investments with good credit availability and historical low market interest rates for all maturities.
Property investors seek quality properties with good locations and/or long and secure cash flows. International investors have been particularly active in the Norwegian market in 2015 driving transaction volumes record high.
The yield compression throughout the last quarters is expected to level out. For Entra's portfolio, with a healthy mix of attractive properties and value enhancing development projects, this should imply continued positive value development, albeit at a significantly slower pace.
With its flexible properties in attractive locations, strong tenant base with long lease contracts, and solid project pipeline, the Board believe that Entra is well positioned for the future.
Oslo, 28 October 2015
The Board of Entra ASA
| All figures in NOK millions | Q3-15 | Q3-14 YTD Q3-15 YTD Q3-14 | 2014 | ||
|---|---|---|---|---|---|
| Rental income | 459 | 448 | 1,322 | 1,323 | 1,772 |
| Other operating revenue | 20 | 40 | 212 | 112 | 225 |
| Total operating revenue | 478 | 488 | 1,535 | 1,435 | 1,997 |
| Repairs & maintenance | 17 | 12 | 33 | 31 | 52 |
| Operating costs | 31 | 29 | 91 | 71 | 96 |
| Other property costs | 17 | 33 | 197 | 99 | 223 |
| Administrative owner costs | 36 | 48 | 123 | 163 | 227 |
| Total operating costs | 101 | 122 | 444 | 364 | 598 |
| Net income from property management | 378 | 366 | 1,091 | 1,072 | 1,399 |
| Changes in value from investment properties | 522 | 365 | 1,415 | 635 | 1,195 |
| Share of profit from associates and jointly controlled entities | -13 | 14 | 29 | 41 | 36 |
| Operating profit | 886 | 745 | 2,534 | 1,748 | 2,629 |
| Interest and other finance income | 3 | 3 | 6 | 15 | 21 |
| Interest and other finance expense | -122 | -176 | -520 | -505 | -666 |
| Net realised financials | -120 | -173 | -514 | -490 | -645 |
| Unrealised changes in value of financial instruments | -86 | -44 | 337 | -315 | -607 |
| Net financials | -205 | -217 | -176 | -805 | -1,252 |
| Profit before tax | 681 | 528 | 2,358 | 942 | 1,377 |
| Tax payable | - | - | - | - | - |
| Change in deferred tax | -188 | -143 | -411 | -243 | -351 |
| Profit for period/year | 492 | 385 | 1,947 | 700 | 1,026 |
| Acturial gains and losses, net of tax | 3 | -11 | 3 | -11 | -26 |
| Total comprehensive income for the period/year | 495 | 374 | 1,950 | 689 | 1,000 |
| Profit attributable to: | |||||
| Equity holders of the Company | 452 | 388 | 1,883 | 689 | 1,027 |
| Non-controlling interest | 41 | -4 | 64 | 11 | -1 |
| Total comprehensive income attributable to: | |||||
| Equity holders of the Company | 454 | 378 | 1,886 | 678 | 1,001 |
| Non-controlling interest | 41 | -4 | 64 | 11 | -1 |
| All figures in NOK millions | 30.09.15 | 30.09.14 | 31.12.14 |
|---|---|---|---|
| NON-CURRENT ASSETS | |||
| Goodwill | 146 | 146 | 146 |
| Other intangible assets | 48 | 30 | 34 |
| Total intangible assets | 194 | 176 | 180 |
| Investment property | 28,093 | 27,288 | 26,679 |
| Property used by owner | 7 | 7 | 7 |
| Other operating assets | 23 | 31 | 34 |
| Total property, plant & equipment | 28,123 | 27,326 | 26,721 |
| Investments in associates and jointly controlled entities | 1,121 | 1,076 | 1,074 |
| Loan to associates and jointly controlled entities | 0 | - | 62 |
| Financial derivatives | 532 | 376 | 550 |
| Other long-term receivables | 51 | 51 | 49 |
| Total financial assets | 1,704 | 1,503 | 1,736 |
| TOTAL NON-CURRENT ASSETS | 30,021 | 29,005 | 28,637 |
| CURRENT ASSETS | |||
| Property and housing-units for sale | 557 | 279 | 197 |
| Trade receivables | 42 | 55 | 45 |
| Other receivables | 99 | 204 | 222 |
| Total current receivables | 698 | 538 | 464 |
| Cash and bank deposits | 158 | 141 | 198 |
| TOTAL CURRENT ASSETS | 856 | 679 | 662 |
| Investment property held for sale | 150 | 260 | 1,551 |
| TOTAL ASSETS | 31,027 | 29,944 | 30,850 |
| All figures in NOK millions | 30.09.15 | 30.09.14 | 31.12.14 |
|---|---|---|---|
| EQUITY | |||
| Paid-in equity | 3,739 | 1,729 | 3,739 |
| Retained earnings | 8,464 | 6,716 | 7,039 |
| Non-controlling interests | 350 | 383 | 286 |
| TOTAL EQUITY | 12,553 | 8,828 | 11,064 |
| LIABILITIES | |||
| Interest-bearing debt | 11,600 | 13,516 | 11,826 |
| Pension liability | 74 | 65 | 82 |
| Deferred tax liability | 3,363 | 2,897 | 2,984 |
| Financial derivatives | 1,136 | 1,053 | 1,353 |
| Other liabilities | 130 | 135 | 129 |
| Total non-current liabilities | 16,302 | 17,666 | 16,373 |
| Trade payables and other payables | 283 | 524 | 521 |
| Interest-bearing debt | 1,821 | 2,828 | 2,821 |
| Tenants prepayments and provisions | 67 | 98 | 70 |
| Total current liabilities | 2,171 | 3,450 | 3,412 |
| TOTAL LIABILITIES | 18,473 | 21,116 | 19,786 |
| TOTAL EQUITY AND LIABILITIES | 31,027 | 29,944 | 30,850 |
| Share | Other paid-in | Other | Non-controlling | ||
|---|---|---|---|---|---|
| All figures in NOK millions | capital | capital | equity | interest Total equity | |
| Equity 31.12.2013 | 142 | 1,587 | 6,287 | 115 | 8,131 |
| Profit for the year | 1,027 | -1 | 1,026 | ||
| Other comprehensive income | -26 | -26 | |||
| Capital increase | 42 | 2,658 | 2,700 | ||
| Share issue costs net of tax | -40 | -40 | |||
| Dividend paid | -650 | -250 | -900 | ||
| Additions with non-controlling interests | 257 | 257 | |||
| Repaid paid-in capital non-controlling interests | -85 | -85 | |||
| Equity 31.12.2014 | 184 | 3,556 | 7,039 | 286 | 11,064 |
| Profit for period | 1,883 | 64 | 1,947 | ||
| Other comprehensive income | 3 | 3 | |||
| Dividend paid | -459 | -459 | |||
| Acquired own shares - employee saving scheme | -0 | -6 | -1 | -7 | |
| Sold own shares - employee saving scheme | 0 | 6 | 0 | 6 | |
| Equity 30.09.2015 | 184 | 3,556 | 8,464 | 350 | 12,553 |
| All figures in NOK millions | Q3-15 | Q3-14 YTD Q3-15 YTD Q3-14 | 2014 | ||
|---|---|---|---|---|---|
| Profit before tax | 681 | 528 | 2,358 | 942 | 1,377 |
| Net expensed interest and fees on loans from financial institutions | 158 | 165 | 436 | 487 | 695 |
| Interest and fees paid on loans from financial institutions | -158 | -154 | -464 | -503 | -740 |
| Share of profit from associates and jointly controlled entities | 13 | -14 | -29 | -41 | -36 |
| Depreciation and amortisation | 4 | 5 | 16 | 14 | 16 |
| Change in market value investment properties | -522 | -365 | -1,415 | -635 | -1,200 |
| Change in market value financial instruments | 86 | 44 | -337 | 315 | 607 |
| Change in working capital | 2 | -85 | 19 | -101 | -52 |
| Net cash flow from operating activities | 264 | 124 | 584 | 478 | 668 |
| Proceeds from sales of investment properties, companies and | |||||
| housing-units | 14 | 65 | 1,740 | 256 | 511 |
| Purchase of business net of cash | - | - | - | -219 | -213 |
| Purchase of investment properties | - | -287 | - | -287 | -287 |
| Cost of upgrades of investment properties | -217 | -236 | -673 | -773 | -1,106 |
| Investment in property and housing units for sale | -29 | -27 | -32 | -123 | -154 |
| Purchase of intangible assets and other plant and equipment | -5 | -3 | -21 | -12 | -40 |
| Net payment financial assets | 10 | - | -6 | - | - |
| Net repayment of loans to associates and jointly controlled entities | - | - | 62 | - | -62 |
| Net payments in associates and jointly controlled entities | -14 | - | -69 | 125 | 115 |
| Dividends from associates and jointly controlled entities | 51 | 50 | 51 | 80 | 80 |
| Net cash flow from investment activities | -191 | -438 | 1,052 | -953 | -1,157 |
| Proceeds interest-bearing debt | 7,565 | 1,721 | 11,129 | 7,301 | 11,910 |
| Repayment interest-bearing debt | -7,552 | -1,226 | -12,345 | -6,612 | -13,086 |
| Proceeds from/repayment of equity | -1 | - | -1 | - | 2,645 |
| Dividends paid | - | -250 | -459 | -250 | -960 |
| Net cash flow from financing activities | 12 | 245 | -1,677 | 439 | 510 |
| Change in cash and cash equivalents | 85 | -69 | -40 | -37 | 21 |
| Cash and cash equivalents at beginning of period | 73 | 210 | 198 | 177 | 177 |
| Cash and cash equivalents at end of period | 158 | 141 | 158 | 141 | 198 |
The results for the period have been prepared in accordance with IAS 34 Interim Financial Reporting.
Except for the accounting principle applied for the newly introduced employee share-based saving scheme, 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 2014.
Sales of shares to employees in the share saving scheme are reported in accordance with IFRS 2 "Share-based payments". The recognised discount is calculated as the difference between market price and purchase price at the time of purchase, taking into account the agreed lock-in period for the shares. The effect of the agreed lock-in period is calculated as the value of a put option using the Black-Scholes model. The discount is recognised as payroll expenses at the time of allocation. The assumptions relating to volatility are based on the actual fluctuations in the price of Entra´s shares.
The financial reporting covers Entra ASA, subsidiaries, associated companies and jointly controlled entities. The interim financial statements have not been audited.
Information reported to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance. The accounting policies of the reportable segments are the same as for the Group's accounting policies. The Group reports its business under four geographic operating segments in line with IFRS 8: Central Oslo, Greater Oslo, South/West Norway and Mid/North Norway. Each of the operating segments has its own profit responsibility.
Segment information is reported to the group management team and to the CEO, which are the Group's highest decisionmaking authority.
Costs related to staff and support functions for the operating segments and group eliminations are included in the segment Group.
| All figures in NOK millions | Central Oslo Greater Oslo | South/West | Mid/North | Group Consolidated | ||
|---|---|---|---|---|---|---|
| Rental income | 239 | 99 | 73 | 48 | - | 459 |
| Other operating revenue | 1 | 11 | 6 | 1 | 0 | 20 |
| Total operating revenue | 240 | 110 | 78 | 49 | 0 | 478 |
| Repairs & maintenance | 9 | 4 | 2 | 2 | - | 17 |
| Operating costs | 12 | 8 | 7 | 5 | -1 | 31 |
| Other property costs | 1 | 12 | 0 | 0 | 3 | 17 |
| Administrative owner costs | 1 | 1 | -1 | 1 | 34 | 36 |
| Total operating costs | 23 | 25 | 9 | 8 | 36 | 101 |
| Net income from property | ||||||
| management | 217 | 86 | 69 | 41 | -35 | 378 |
| Carrying amount of investment property | ||||||
| Investment property | 14,795 | 6,646 | 4,042 | 2,610 | 28,093 | |
| Investment property held for sale | - | - | - | 150 | 150 |
| All figures in NOK millions | Central Oslo Greater Oslo | South/West | Mid/North | Group Consolidated | ||
|---|---|---|---|---|---|---|
| Rental income | 195 | 129 | 80 | 50 | -7 | 448 |
| Other operating revenue | 1 | 28 | 17 | 1 | -7 | 40 |
| Total operating revenue | 196 | 157 | 97 | 51 | -14 | 488 |
| Repairs & maintenance | 6 | 3 | 2 | 1 | - | 12 |
| Operating costs | 9 | 9 | 9 | 5 | -2 | 29 |
| Other property costs | 3 | 24 | 0 | 0 | 5 | 33 |
| Administrative owner costs | 3 | 3 | 11 | 2 | 30 | 48 |
| Total operating costs | 21 | 39 | 22 | 7 | 33 | 122 |
| Net income from property | ||||||
| management | 175 | 118 | 75 | 44 | -47 | 366 |
| Carrying amount of investment property | ||||||
| Investment property | 13,134 | 7,189 | 4,286 | 2,680 | 27,288 | |
| Investment property held for sale | 100 | - | 111 | 49 | 260 |
| All figures in NOK millions | Central Oslo Greater Oslo | South/West | Mid/North | Group Consolidated | ||
|---|---|---|---|---|---|---|
| Rental income | 635 | 323 | 214 | 150 | - | 1,322 |
| Other operating revenue | 17 | 172 | 17 | 5 | 1 | 212 |
| Total operating revenue | 652 | 495 | 231 | 155 | 1 | 1,535 |
| Repairs & maintenance | 15 | 7 | 6 | 4 | - | 33 |
| Operating costs | 30 | 24 | 23 | 15 | -1 | 91 |
| Other property costs | 3 | 178 | 1 | 1 | 14 | 197 |
| Administrative owner costs | 4 | 4 | 1 | 3 | 111 | 123 |
| Total operating costs | 52 | 212 | 32 | 23 | 125 | 444 |
| Net income from property | ||||||
| management | 599 | 283 | 200 | 132 | -123 | 1,091 |
| Carrying amount of investment property | ||||||
| Investment property | 14,795 | 6,646 | 4,042 | 2,610 | 28,093 | |
| Investment property held for sale | - | - | - | 150 | 150 |
| All figures in NOK millions | Central Oslo Greater Oslo | South/West | Mid/North | Group Consolidated | ||
|---|---|---|---|---|---|---|
| Rental income | 586 | 371 | 221 | 152 | -7 | 1,323 |
| Other operating revenue | 6 | 81 | 22 | 3 | -0 | 112 |
| Total operating revenue | 593 | 452 | 243 | 155 | -7 | 1,435 |
| Repairs & maintenance | 17 | 6 | 5 | 2 | - | 31 |
| Operating costs | 25 | 17 | 15 | 14 | -2 | 71 |
| Other property costs | 10 | 73 | 1 | 1 | 14 | 99 |
| Administrative owner costs | 10 | 9 | 24 | 5 | 114 | 163 |
| Total operating costs | 63 | 106 | 46 | 23 | 126 | 364 |
| Net income from property | ||||||
| management | 530 | 345 | 197 | 133 | -134 | 1,072 |
| Carrying amount of investment property | ||||||
| Investment property | 13,134 | 7,189 | 4,286 | 2,680 | 27,288 | |
| Investment property held for sale | 100 | - | 111 | 49 | 260 |
| All figures in NOK millions | Central Oslo | Greater Oslo | South/West | Mid/North | Group | Consolidated |
|---|---|---|---|---|---|---|
| Rental income | 781 | 502 | 285 | 204 | - | 1,772 |
| Other operating revenue | 7 | 184 | 26 | 7 | 2 | 225 |
| Total operating revenue | 788 | 686 | 311 | 211 | 2 | 1,997 |
| Repairs & maintenance | 25 | 14 | 10 | 4 | - | 52 |
| Operating costs | 31 | 25 | 21 | 18 | 0 | 96 |
| Other property costs | 18 | 187 | 1 | 2 | 15 | 223 |
| Administrative owner costs | 14 | 13 | 26 | 7 | 166 | 227 |
| Total operating costs | 89 | 240 | 58 | 30 | 182 | 598 |
| Net income from property | ||||||
| management | 700 | 446 | 253 | 181 | -180 | 1,399 |
| Carrying amount of investment property | ||||||
| Investment property | 13,704 | 6,172 | 4,291 | 2,512 | 26,679 | |
| Investment property held for sale | - | 1,193 | 110 | 248 | 1,551 | |
| 3. Investment properties | ||||||
| All figures in NOK millions | Q3-15 | Q3-14 | YTD Q3-15 |
YTD Q3-14 |
31.12.14 | |
| Closing balance previous period | 28,118 | 26,637 | 28,230 | 24,818 | 24,818 | |
| Purchase of investment property | - | 288 | - | 1,581 | 1,581 | |
| Investment in the property portfolio | 134 | 252 | 594 | 797 | 1,077 | |
| Capitalised borrowing costs | 2 6 |
21 | 23 | 37 | ||
| Sale of investment property | -40 | 0 | -1,524 | -305 | -477 | |
| Reclassified to property and housing-units for sale | -493 | - | -493 | - | - | |
| Changes in value from operational lease | -42 | 10 | -19 | 4 | 36 | |
| Changes in value from investment properties | 563 | 355 | 1,434 | 631 | 1,158 | |
| Closing balance | 28,243 | 27,548 | 28,243 | 27,548 | 28,230 | |
| Investment property held for sale | 150 | 260 | 150 | 260 | 1,551 | |
| Investment property | 28,093 | 27,288 | 28,093 | 27,288 | 26,679 | |
| Investment properties held for sale include the property Strandveien 13 in Tromsø. | ||||||
| The value change on operational lease agreements relates to the property Langkaia 1, which is owned under a lease that expires on 31 December 2030. The property will then revert without consideration to the Oslo Harbour Authority. The |
| YTD | YTD | ||||
|---|---|---|---|---|---|
| All figures in NOK millions | Q3-15 | Q3-14 | Q3-15 | Q3-14 | 31.12.14 |
| Closing balance previous period | 28,118 | 26,637 | 28,230 | 24,818 | 24,818 |
| Purchase of investment property | - | 288 | - | 1,581 | 1,581 |
| Investment in the property portfolio | 134 | 252 | 594 | 797 | 1,077 |
| Capitalised borrowing costs | 2 | 6 | 21 | 23 | 37 |
| Sale of investment property | -40 | 0 | -1,524 | -305 | -477 |
| Reclassified to property and housing-units for sale | -493 | - | -493 | - | - |
| Changes in value from operational lease | -42 | 10 | -19 | 4 | 36 |
| Changes in value from investment properties | 563 | 355 | 1,434 | 631 | 1,158 |
| Closing balance | 28,243 | 27,548 | 28,243 | 27,548 | 28,230 |
| Investment property held for sale | 150 | 260 | 150 | 260 | 1,551 |
| Investment property | 28,093 | 27,288 | 28,093 | 27,288 | 26,679 |
property is classified as an investment property under IAS 40 and is valued at NOK 671 million as at the end of the third quarter of 2015. The Group records quarterly a negative value change on the property as the maturity date of the lease approaches.
Entra is currently involved in legal or arbitration proceedings or disputes with Norwegian Datasenter Group AS, Greenfield Property AS and Evry ASA/Evry AS. Refer to the annual report 2014 for further explanations regarding these proceedings.
The hearing of the dispute with Norwegian Datasenter Group AS and Greenfield Property AS took place in Oslo District Court in January 2015 and Entra prevailed on all counts. The judgment has been appealed by the counterparty and will take place in June 2016.
The hearing of the dispute with Evry ASA/Evry AS took place in Oslo District Court in February 2015 and Evry ASA/Evry AS prevailed. Entra disagree with the verdict and the ruling has been appealed and will probably take place in June 2016.
The dispute with Caverion Norge AS was reconciled in mid October 2015. The settlement of the dispute was in accordance with provisions previously made.
Entra has not made any provision for the claims as the Group considers it not probable that an outflow of resources involving economic benefits will be required to settle the obligation.
The Board of Entra ASA has decided to establish a share saving scheme in 2015, offering all employees, including management, the opportunity to purchase shares in Entra ASA at a 20 per cent discount. The shares are subject to twoyear lock-in period. The purchase price in the employee offering is calculated as the average share price the last 30 days (VWAP) until and including 29 May 2015 less a 20 per cent discount. Total subscription amounted to NOK 4.9 million after discount.
Entra has acquired in Q2-15 a total of 83,129 of its own shares. The total amount paid to acquire the shares was NOK 6.1 million. All shares were sold to the employees in connection with the share saving scheme to employees in June 2015. The Group expensed NOK 0.5 million in the income statement in Q2-2015.
The valuation methods and principles are unchanged in the quarter. See the annual financial statements for 2014 for further information. Set out below is a summary of financial instruments divided between the different valuation hierarchies set out in IFRS 7.
With the exception of equity capital instruments of NOK 0.6 million and investment properties (level 3) all financial instruments are level 2.
| All figures in NOK millions | 30.09.15 | 30.09.14 | 31.12.14 |
|---|---|---|---|
| Assets measured at fair value | |||
| Assets measured at fair value with | |||
| change over the result | |||
| - Investment property | 28,093 | 27,288 | 26,679 |
| - Investment property held for sale | 150 | 260 | 1,551 |
| - Derivatives | 532 | 376 | 550 |
| Financial assets held for sale | |||
| - Equity instruments | 1 | 1 | 1 |
| Total | 28,775 | 376 | 28,781 |
| Liabilities measured at fair value | |||
| Financial liabilitites measured at fair value with | |||
| change over the result | |||
| - Derivatives | 1,136 | 1,053 | 1,353 |
| - Bonds | 4,120 | 4,384 | 3,859 |
| - Commercial paper | 600 | 1,650 | 1,350 |
| Total | 5,856 | 7,087 | 6,561 |
The Group has completed a sale of a portfolio of six properties in Østfold and Lillestrøm with a total property value of NOK 1,375 billion in the first quarter of 2015. Closing and settlement took place at 24 February 2015. All properties involved are located in the Greater Oslo region.
Key figures for the property portfolio in total are listed below:
| All figures in NOK millions | 2013 | 2014 |
|---|---|---|
| Total income | 101 | 103 |
| Property costs | 7 | 6 |
| Net income from property management | 94 | 97 |
| Book value as of 31.12 | 1,163 | 1,189 |
The properties were sold as sales of shares and thus the transaction was tax exempted.
| All figures in NOK millions | Q3-15 | Q3-14 | 31.12.14 |
|---|---|---|---|
| Investment property | 28,093 | 27,288 | 26,679 |
| Investment properties held for sale | 150 | 260 | 1,551 |
| Properties for use of the group | 8 | 8 | 9 |
| Property and housing units held for sale | 576 | 279 | 197 |
| Prepaid VAT compensation | -70 | -87 | -78 |
| Property market value | 28,756 | 27,748 | 28,358 |
| All figures in NOK millions | Q3-15 | Q3-14 | YTD Q3-15 | YTD Q3-14 | 2014 |
|---|---|---|---|---|---|
| Net income from property management | 378 | 366 | 1,091 | 1,072 | 1,399 |
| Depreciation | 3 | 5 | 16 | 14 | 18 |
| EBITDA adjusted | 381 | 371 | 1,107 | 1,085 | 1,418 |
| Share of EBITDA Entra OPF Utvikling | 1 | 1 | 4 | 15 | 16 |
| EBITDA adjusted for share of Entra OPF Utvikling | 382 | 372 | 1,111 | 1,101 | 1,434 |
| Interest cost | 129 | 166 | 420 | 504 | 682 |
| Other finance expense | 1 | 5 | 12 | 12 | 19 |
| Applicable net interest cost | 130 | 171 | 433 | 517 | 701 |
| Interest Coverage Ratio (ICR) | 2.9 | 2.2 | 2.6 | 2.1 | 2.0 |
| All figures in NOK millions | Q3-15 | Q3-14 | 2014 |
|---|---|---|---|
| Net nominal interest-bearing debt | 12,843 | 15,835 | 13,890 |
| Total market value of the property portfolio | 29,229 | 28,132 | 28,720 |
| M arket value of the property portfolio Share of Entra OPF Utvikling (50%) |
28,759 470 |
27,748 384 |
28,358 362 |
| Debt ratio (LTV) % | 43.9 | 56.3 | 48.4 |
| All figures in NOK millions | Q3-15 | Q3-14 | 2014 |
|---|---|---|---|
| Book value of investment properties | 28,242 | 27,548 | 28,230 |
| Net interest-bearing debt | 13,263 | 16,203 | 14,449 |
| Other debt-like items | 2,426 | 2,517 | 2,718 |
| Total equity | 12,553 | 8,828 | 11,064 |
| Less: Non-controlling interests | 350 | 383 | 286 |
| NAV per financial statement | 12,204 | 8,445 | 10,778 |
| Add: Adjustment to property portfolio | 20 | 2 | 2 |
| Add: Revaluation of investments made in the JV | 223 | 319 | 194 |
| Add: Net market value on financial derivatives | 604 | 678 | 803 |
| Add: Deferred tax arising on revaluation moments | 2,576 | 2,403 | 2,252 |
| EPRA NAV | 15,626 | 11,846 | 14,029 |
| Market value on property portfolio | 28,756 | 27,748 | 28,358 |
| Tax value on property portfolio | 12,386 | 13,334 | 13,124 |
| Basis for calculation of tax on gain on sale | 16,370 | 14,414 | 15,234 |
| Less: Market value of tax on gain on sale (5% tax rate) | 819 | 721 | 762 |
| Net market value on financial derivatives | 604 | 678 | 803 |
| Tax expense on realised net financial derivatives (27% tax rate) | 163 | 183 | 217 |
| Less: Net result from realisation of financial derivatives | 441 | 495 | 586 |
| Book value of interest bearing debt | 13,421 | 16,344 | 14,647 |
| Nominal value of interest bearing debt | 13,001 | 15,976 | 14,088 |
| Basis for calculation of tax on realisation of interest bearing debt | 420 | 368 | 559 |
| Less: Market value of tax on realisation (27% tax rate) | 113 | 99 | 151 |
| EPRA NNNAV | 14,254 | 10,531 | 12,531 |
| All figures in NOK millions | Q3-15 | Q3-14 YTD Q3-15 YTD Q3-14 | 2014 | ||
|---|---|---|---|---|---|
| Profit for period/year - Earnings per IFRS income statement | 492 | 385 | 1,947 | 700 | 1,026 |
| Add: | |||||
| Change in value from investment property | -522 | -365 | -1,415 | -635 | -1,195 |
| Tax on changes in value of investment property (27% tax rate) | 141 | 98 | 382 | 171 | 323 |
| Reversal of deferred tax arising from sales of properties (tax | |||||
| excempted) | -0 | - | -215 | ||
| Unrealised changes in value of financial instruments | 86 | 44 | -337 | 315 | 607 |
| Tax on unrealised changes in value of fin. instr. (27% tax rate) | -23 | -12 | 91 | -85 | -164 |
| Profit or losses on disposal of inventory in Oslo S Utvikling AS | -1 | 2 | -20 | -12 | -23 |
| Share of profit jointly controlled entities – fair value adjustments | 14 | -16 | -16 | -22 | 6 |
| Non-controlling interests of subsidiaries | -9 | -6 | -23 | -16 | -24 |
| Significant one-off items | -22 | 62 | |||
| EPRA earnings | 155 | 131 | 455 | 416 | 555 |
Significant one-off items consist of termination of swap contracts in Q2-2015 of NOK 115 million and NOK 30 million in rent compensation in relation to a termination of the lease contract in Langkaia 1 in Q3-15. The items are presented after tax.
| 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. |
|---|---|---|
| Cash earnings | - | Result from property management less net realised financials and payable tax. |
| Contractual rent | - | Annual cash rental income being received as of relevant date |
| EPRA Earnings | - | Net income after tax excluding value changes on investment properties, unrealised changes in the market value of financial derivatives and gains/losses on the sale of properties and their associated tax effects. All adjustments are also made for jointly controlled entities. EPRA earnings are intended to give an indication of the underlying development in the property portfolio |
| EPRA NAV | - | Net asset value adjusted to include market value of all properties in the portfolio and interest bearing debt, 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 NAV is to demonstrate the fair value of net assets given a long-term investment horizon |
| EPRA NNNAV | - | 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. 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 |
| Gross yield | - | 12 months rolling rent divided by the market value of the management portfolio |
| Independent Appraisers |
- | Akershus Eiendom and DTZ |
| Land and development 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 sales of properties and active projects |
|
| Loan-to-value ("LTV") |
- | Net nominal value of interest-bearing liabilities divided by the market value of the property portfolio and the market value of the jointly controlled entity Entra OPF Utvikling |
| 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 property |
- | The market value of all the properties owned by the parent company and subsidiaries, regardless of their classification for accounting purposes. Does not include the market value of properties in |
| portfolio Net rent |
- | associates and jointly controlled entities 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. Based on EPRA standard |
| Project properties |
- | Properties where it has been decided to start construction of a new building and/or renovation |
| Interest Coverage Ratio ("ICR") |
- | Net income from property management excluding depreciation and amortisation for the Group including Entra OPF, divided by net interest on interest-bearing nominal debt and fees and commitment fees related to investment activities |
| Total area | - | Total area including the area of management properties, project properties and land / development properties |
| WAULT | - | Weighted Average Unexpired Lease Term measured as the remaining contractual lease 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 |
ENTRA ASA Biskop Gunnerus´gate 14 | P.O. Box 52 Økern | 0508 Oslo | Norway entra.no
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