Quarterly Report • Nov 1, 2016
Quarterly Report
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Central, flexible and environment friendly office properties
Net letting of 44 million in the quarter
18 mill.
Property management
EPRA NAV excl. dividend
| All figures in NOK millions | Q3-16 | Q3-15 | YTD Q3-16 | YTD Q3-15 | 2015 | 2014 | 2013 |
|---|---|---|---|---|---|---|---|
| Rental income | 477 | 459 | 1 393 | 1 322 | 1 760 | 1 772 | 1 632 |
| Change period-on-period | 4% | 2% | 5% | 0% | -1% | 9% | 3% |
| Net operating income | 435 | 411 | 1 285 | 1 198 | 1 574 | 1 624 | 1 475 |
| Change period-on-period | 6% | 1% | 7% | -2% | -3% | 10% | 3% |
| Net income from property management |
260 | 258 | 797 | 579 | 799 | 774 | 525 |
| Change period-on-period | 1% | 15% | 38% | -10% | 3% | 47% | na |
| Profit before tax | 757 | 681 | 1 831 | 2 358 | 3 075 | 1 377 | 458 |
| Change period-on-period | 11% | 29% | -22% | 150% | 123% | 201% | -43% |
| Profit after tax | 582 | 492 | 1 407 | 1 947 | 2 721 | 1 026 | 466 |
| Change period-on-period | 18% | 28% | -28% | 178% | 165% | 120% | -35% |
| Market value of the property portfolio* |
35 191 | 28 756 | 35 191 | 28 756 | 29 598 | 28 358 | 24 963 |
| Net nominal interest-bearing debt | 17 516 | 12 843 | 17 516 | 12 843 | 14 640 | 13 890 | 14 350 |
| Loan to value* | 48.7% | 43.9% | 48.7% | 43.9% | 46.1% | 48.4% | 56.6% |
| Interest coverage ratio* | 2.7 | 2.9 | 2.7 | 2.6 | 2.5 | 2.0 | 1.8 |
| Number of shares | 183.7 | 183.7 | 183.7 | 183.7 | 183.7 | 183.7 | 0.1 |
| All figures in NOK per share* | Q3-16 | Q3-15 | YTD Q3-16 | YTD Q3-15 | 2015 | 2014 | 2013 |
| EPRA Earnings | 1.0 | 0.8 | 3.1 | 2.5 | 3.2 | 3.0 | 3 158 |
| Change period-on-period | 13% | na | 24% | na | 8% | na | na |
| EPRA NAV | 93 | 85 | 93 | 85 | 89 | 76 | 76 998 |
| Change period-on-period | 10% | na | 10% | na | 16% | na | na |
| EPRA NNNAV | 85 | 78 | 85 | 78 | 81 | 68 | 69 253 |
| Change period-on-period | 9% | na | 9% | na | 20% | na | na |
| Cash earnings/* | 1.4 | 1.4 | 4.3 | 3.8 | 5.0 | 4.1 | 3 833.3 |
| Change period-on-period | 1% | na | 15% | na | 21% | na | na |
| Dividend per share | 0 | 0 | 1.7 | na | 3.0 | 2.5 | na |
| Change period-on-period | 0 | 0 | 100% | na | 20% | na | na |
Reference
* See section "Calculation of key figures and definitions"
** Cash earnings in 2015 has been adjusted by 115 million due to termination of swap contracts in Q2-2015.
The termination fee was defined as a one-off item and did not reduce cash earnings as a basis for dividend for 2015.
*** Cash earnings definition changed from Q1-16 to also include net income from property management for JVs excluding Oslo S Utvikling. See definitions.
Several of the numbers are marked as not applicable ("na") as the figures are not comparable either due to historical changes in the P&L or due to changes in the outstanding shares of Entra ASA.
The Group's rental income was up by 4 per cent from 459 million to 477 million quarter on quarter. The increased rental income can be explained by the factors in the below income bridge.
| All figures in NOK millions | Q315 - Q316 |
|---|---|
| Rental income previous period | 459 |
| Development projects | 14 |
| Acquisitions | 33 |
| Disposals | -8 |
| Other* | -35 |
| Like-for-like growth | 15 |
| Rental income | 477 |
*Extraordinary lease buy-out in Q3-15 (30 mill)
On a like-for-like basis the rental growth was 4.1 per cent compared to the same quarter last year, of which the annual indexation of the lease contracts constituted 2.8 per cent. The remaining growth is mainly driven by income effects from high letting activity and increased occupancy in Biskop Gunnerus gate 14 in Oslo. Average 12 months rolling rent per square meter was 1,836 (1,716) as of 30.09.16. 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.
The occupancy rate increased to 96.1 per cent (94.5 per cent) as of 30.09.16. The rental value of vacant space as of 30.09.16 was approximately 79 million (95 million) on an annualised basis. Gross letting including re-negotiated contracts was 118 million in the quarter of which 41 million is attributable to letting in the project portfolio. Lease contracts with a total value of 22 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 44 million (19 million) in the quarter. The time difference between the net letting in the management portfolio in the quarter and its effect on the financial results is normally 6-12 months. Estimated income effects from letting in the project portfolio can be found in the project table under the section Investments and Divestments.
Total property costs amounted to 42 million (48 million) in the third quarter 2016. Total property costs is split as follows:
| All figures in NOK millions |
Q3-16 | Q3-15 | YTD Q3-16 |
YTD Q3-15 |
|---|---|---|---|---|
| Maintenance | 14 | 17 | 30 | 33 |
| Tax, leasehold, insurance |
11 | 12 | 25 | 28 |
| Letting and prop. adm. | 10 | 5 | 27 | 28 |
| Direct property costs | 7 | 14 | 26 | 36 |
| Total operating costs | 28 | 31 | 78 | 91 |
| Total property costs | 42 | 48 | 108 | 124 |
As a consequence of the effects explained above, net operating income came in at 435 million (411 million) in the third quarter 2016.
Other revenues was 71 million (20 million) and other costs was 65 million (17 million) in the third quarter 2016. In the quarter, revenues of 48 million was related to Youngskvartalet in Oslo which is classfied as a construction contract. Until the project is delivered to the buyer, the Group will recognise other revenue and other costs based on the completion level. Other costs associated with the project amounted to 47 million in the quarter.
In addition, other revenue consists of 16 million (2 million) in the third quarter 2016 related to services provided to tenants.
Other costs also consists of other property costs mainly related to depreciation and rental expenses.
Administrative costs amounted to 38 million (36 million) in the quarter.
Entra`s share of profit from associates and JVs was 57 million (- 13 million) in the third quarter 2016. The result in the quarter is impacted by positive value changes in associates and JVs and a positive result from Oslo S Utvikling due to sales and delivery of appartments. In Q3 2015 the result was impacted by negative value change in Entra OPF.
Entra`s share of profit from associates and JVs is composed as follows:
| Results from associates and JVs |
57 | -13 | 76 | 29 |
|---|---|---|---|---|
| Other income and costs |
28 | -1 | 23 | 12 |
| Tax | -10 | 5 | -18 | -12 |
| Changes in market value |
37 | -18 | 42 | 27 |
| Income from property management |
3 | 1 | 29 | 2 |
| All figures in NOK millions |
Q3-16 | Q3-15 | YTD Q3-16 |
YTD Q3 15 |
For a more detailed breakdown of the results from associates and JVs see the section on Partly owned companies.
Net realised financials amounted to 145 million (120 million) in the quarter and is composed as follows:
| All figures in NOK millions |
Q3-16 | Q3-15 | YTD Q3-16 |
YTD Q3-15 |
|---|---|---|---|---|
| Interest and other finance income Interest and other |
3 -148 |
3 -122 |
6 -425 |
6 -520 |
| finance expense | ||||
| Net realised financials |
-145 | -120 | -418 | -514 |
Net realised financials has increased in the third quarter of 2016 compared to 2015, and this is mainly due to increased interest bearing debt of approximately 5 billion compared to the same quarter last year, following the acquisition of the Oslo City and Skøyen properties. The increase in net realised financial is somewhat offset by lower interest rates on floating rate debt (Nibor).
The average interest rate was 3.41 per cent (3.90 per cent) as at 30.09.16.
Net income came in at 315 million (245 million) in the quarter. When including only the income from property management in the results from JVs, the net income from property management was 260 million (258 million) in the quarter, representing a year-on-year increase of 2 per cent.
| All figures in NOK millions |
Q3-16 | Q3-15 | YTD Q3-16 |
YTD Q3-15 |
|---|---|---|---|---|
| Net income Less: |
315 | 245 | 844 | 606 |
| Value changes in associates and JVs |
37 | -18 | 42 | 27 |
| Tax from associates and JVs |
-10 | 5 | -18 | -12 |
| Other income and costs |
28 | -1 | 23 | 12 |
| Net income from property management |
260 | 258 | 797 | 579 |
(Annualised, rolling 4 quarters)
* Q215 adjusted for 115 million swap termination fee.
The valuation of the property portfolio resulted in a net positive value change of 374 million (522 million) in the third quarter 2016. In the quarter, about 150 million of the value changes is attributable to yield compression, 32 million relates to the current project portfolio and 124 million is the result of new and renegotiated lease contracts signed in the quarter. The remaining changes are related to terminations of contracts, transactions in the quarter and other property related changes.
Net changes in the value of financial instruments was 68 million (-86 million) in the quarter, The positive development in the quarter is mainly explained by higher market interest rates and reduced time to maturity on high interest rate swaps, partly offset by a negative contribution related to decreasing credit margins on existing fixed rate debt.
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 2015, the tax loss carry forward for the Group was 1,272 million. The change in deferred tax was 175 million (188 million) in the quarter. The current tax rate is 25 per cent. However, the effective tax rate is less than 25 per cent mainly due to sales of properties without tax effect.
Profit before tax was 757 million (681 million) and profit after tax was 582 million (492 million) in the quarter. The total comprehensive income was 562 million (495 million) in the quarter impacted by acturial differences related to the groups closed defined benefit scheme.
EPRA Earnings amounted to 175 million (152 million) in the third quarter. The increase in EPRA earnings in the quarter is mainly related to increased net income from property management.
EPRA Earnings net of tax amounted to 244 million (242 million) in the third quarter.
The Group's assets amounted to 38,178 million (31,027million) as at 30.09.16. Of this, investment property amounted to 34,356 million (28,093 million) and investment property held for sale to 138 million (150 million). Two properties were classified as held for sale as at 30.09.16. Intangible assets were 162 million (194 million) at the end of the quarter of which 145 million is goodwill related to Hinna Park.
Investments in associates and jointly controlled entities were 1,585 million (1,121 million). The increase is mainly related to capital injection in the jointly controlled entity Entra OPF that develop MediaCity Bergen, as this company is funded only by equity, and the purchase of 50 per cent of Oslo City Parkering AS, of which Steen & Strøm AS owns the remaining part.
Property and housing-units for sale amounted to 676 million (557 million) at the end of the quarter, mainly impacted by the property Gullfaks at Hinna Park. The property had closing at the end of October 2016. At the end of the third quarter 2015 the amount comprised the housing unit project at Ringstabekk of which the major part of the apartments were sold during 2015.
Other receivables was 344 million (99 million) at the end of September 2016. The increase compared to the third quarter 2015 was affected by capitalised construction costs of 223 million related to the property Youngskvartalet that will be delivered to the buyer in the fourth quarter of 2017.
The Group held 188 million (158 million) in cash and cash equivalents at 30.09.16. In addition, the Group has 4,955 million ( 3,690 million) in unutilised credit facilities.
The Group had interest bearing debt of 18,239 million (13,421 million) as of 30.09.16. The increase is mainly explained by the acquisition of the Skøyen portfolio for approximately 2.5 billion, the office section of Oslo City Kjøpesenter AS for approximately 1.6 billion, the development project "Trondheimsporten" for 132 million in Q4 2015 and payment of dividend of 551 million year to date in 2016.
Other current liabilities was 707 million (184 million) at the end of third quarter 2016. The increase is mainly explained by halfyear dividend paid of 312 million to the shareholders at the beginning of October 2016. In addition, Entra has recorded a liability in connection with the the settlement of the purchase
of the Skøyen portfolio of 92 million and capital injection in Entra OPF to be paid in October 2016.
Book equity totaled 13,874 million (12,553 million), representing an equity ratio of 36.3 per cent (40.5 per cent). Book equity per share was 76 (68). Equity per share was 93 (85) based on the EPRA NAV standard and 85 (78) based on EPRA NNNAV. Outstanding shares at 30.09.16 totalled 183.7 million (183.7 million)
Net cash flow from operating activities came to 263 million (264 million) in the third quarter 2016.
The net cash flow from investment activitites was – 2,721 million (-191 million) in the quarter. Proceeds from property transactions of 64 million (14 million) in the quarter was mainly related to the delivery of Fritzners gate 12 in Oslo and Telemarksgata 11 in Skien. In the third quarter of 2015, the amount mainly relates to proceed from the sale of housing units in Ringstabekk outside Oslo.
Purchase of investment properties of 2,548 million (0) relates to the acquisition of the Skøyen portfolio in Oslo and the land plot Lars Hillesgate 25 in Bergen.
The cash effect from upgrades of investment properties amounted to 192 million (217 million) in the quarter. Investment in property and housing units for sale of 52 million (29 million) in the quarter is mainly related to investments in the property "Gullfaks" in Stavanger and Youngskvartalet in Oslo.
Net payments in associates and jointly controlled entities amounted to -42 million (-14 million) in the quarter of which 42 million in the quarter relates to capital increase in Entra OPF that develop MediaCity Bergen..
Net cash flow from financing acitivites was 2,488 million (12 million) in the quarter.
During the quarter Entra has had a net repayment of bank loans of 943 million, net issued bond loans amounting to 1,400 million and paid withholding tax related to dividend paid in Q2 2016 of 19 million.
The net change in cash and cash equivalents was 31 million (85 million) in the third quarter 2016.
During the third quarter, Entra's total interest bearing debt increased by 2,508 million, mainly due to the settlement of the Skøyen-transaction. The debt increase was composed by new bond issues totalling 1,400 million, increased bank debt by 1,008 million, and 100 million in new commercial paper financing.
Entra's bond issues during the quarter consisted of a new 5-year green bond of 1,000 million, as well as reopening of a 6-year fixed rate bond with 400 million. Entra has also refinanced commercial paper loans for a total of 600 million.
During the quarter, Entra has established a new 4-year bank credit facility of 1,000 million.
As at 30.09.16, net interest-bearing nominal debt after deduction of liquid assets of 188 million was 17,516 million.
The average remaining term of the Group's debt portfolio was 4.6 years at 30.09.16 (4.6 years as at 30.09.15). 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, 69 per cent of the Group's financing was from the capital market.
| Maturity profile | 0-1 yrs | 1-2 yrs | 2-3 yrs | 3-4 yrs | 4+ yrs | Total |
|---|---|---|---|---|---|---|
| Commercial paper (NOKm) | 2 000 | - | - | - | - | 2 000 |
| Bonds (NOKm) | 1 029 | 1 700 | 1 200 | 1 200 | 5 100 | 10 229 |
| Bank loans (NOKm) | 700 | 110 | 2 182 | 20 | 2 463 | 5 475 |
| Total (NOKm) | 3 729 | 1 810 | 3 382 | 1 220 | 7 563 | 17 704 |
| Commercial paper (%) | 54 | 0 | 0 | 0 | 0 | 11 |
| Bonds (%) | 28 | 94 | 35 | 98 | 67 | 58 |
| Bank loans (%) | 19 | 6 | 65 | 2 | 33 | 31 |
| Total (%) | 100 |
| Unutilised credit facilities (NOKm) | 500 | 1 300 | 1 518 | 980 | 657 | 4 955 |
|---|---|---|---|---|---|---|
| Unutilised credit facilities (%) | 10 | 26 | 31 | 20 | 13 | 100 |
| Sources of financing | NOKm | % |
|---|---|---|
| Bonds listed at OSE | 9 129 | 52 |
| Secured bond 2030 Entra | 1 100 | 6 |
| Bank loans Entra | 3 440 | 19 |
| Bank loans subsidiaries | 2 035 | 11 |
| Commercial paper | 2 000 | 11 |
| Total | 17 704 | 100 |
| All figures in NOK millions | 30.09.2016 | Target |
|---|---|---|
| Loan-to-value (LTV) | 48.7% | Approx. 50% |
| Interest coverage ratio (ICR) | 2.7 | Min. 1.65x |
| Debt maturities <12 months | 21% | Max 30% |
| Maturity of hedges <12 months | 49% | Max 50% |
| Average time to maturity (hedges) | 3.2 | 2-6 years |
| Financing commitments next 12m | 133% | Min. 100% |
| Average time to maturity (debt) | 4.6 | Min. 3 years |
The average interest rate of the debt portfolio was 3.41 per cent as at 30.09.16. 51 per cent of the Group's financing was hedged at a fixed interest rate as at 30.09.16, with a weighted maturity of 3.2 years.
The Group manages interest rate risk mainly by entering into floating-to-fixed interest rate swaps and issuance of fixed rate bonds. The table below shows the maturity profile and contribution from fixed rate instruments, as well as maturity profile for credit margins on debt.
| The Group's total debt in millions: | 17 704 |
|---|---|
| The Group's average interest rate (%)¹ | 3.41 |
| Fixed rate instruments² | Forward starting swaps⁴ | Average credit margin |
|||||
|---|---|---|---|---|---|---|---|
| Amount (NOKm) |
Interest rate (%)³ |
Amount | Interest rate (%) |
Tenor (years) |
Amount (NOKm) |
Credit margin (%) |
|
| <1 year | 152 | 3.57 | 7 734 | 1.06 | |||
| 1-2 years | 1 810 | 3.89 | 900 | 2.33 | 7 | 2 450 | 1.09 |
| 2-3 years | 1 000 | 4.05 | 1 200 | 2.02 | 7 | 1 200 | 0.86 |
| 3-4 years | 2 100 | 3.94 | 1 220 | 1.22 | |||
| 4-5 years | 950 | 4.86 | 1 000 | 1.07 | |||
| 5-6 years | 750 | 2.07 | 800 | 0.78 | |||
| 6-7 years | 1 050 | 2.51 | 2 200 | 1.14 | |||
| 7-8 years | 900 | 2.71 | |||||
| 8-9 years | |||||||
| 9-10 years | |||||||
| >10 years | 510 | 5.36 | 1 100 | 0.39 | |||
| Total | 9 222 | 3.67 | 2 100 | 2.15 | 17 704 | 1.02 |
¹Average reference rate (nibor) is 1.00 per cent as of the reporting date.
²Excluding forward starting swaps.
³Excluding forward starting swaps and credit margins on fixed rate bonds (credit margins are displayed in the table to the right)
⁴The table displays future starting point, notional principle amount, average fixed rate and tenor for forward starting swaps.
Entra owns and manages 87 buildings with a total area of approximately 1.1 million square metres. As of 30.09.16, the management portfolio had a market value of around 33 billion. The occupancy rate was 96.1 per cent (94.5 per cent). The weighted average unexpired terms for the Group's leases was 6.8 years (7.4) for the management portfolio and 7.2 years (7.5) when the project portfolio is included. The public sector represents approximately 70 per cent of the total customer portfolio. Total market value of the entire property portfolio is about 35 billion and consist of 98 properties. Entra focuses the portfolio on the major cities in Norway; Oslo and the surrounding region, Bergen, Stavanger and Trondheim. Entra has its head office in Oslo.
Entra´s properties are valued by two external appraisers (Akershus Eiendom and DTZ) on a quarterly basis. The market value of the portfolio in Entra´s balance sheet is based on the average of the two external appraiser's valuation of each individual property. 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 valuer's estimated return requirements and expectations on future market development. The market value is defined as the external valuer'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 specific project risk on valuation date. The land and development portfolio is valued based on actually zoned land.
Year-on-year, the portfolio net yield is reduced from 6.0 per cent to 5.6 per cent. 12 months rolling rent has increased from 1,738 to 1,863 per square meter, whereas the market rent has increased from 1,737 to 1,858 per square meter.
| Number | Area | Occupancy | Wault | Market value | 12 months rolling rent | Net yield | Market rent | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (#) | (sqm) | (%) | (year) | (NOKm) | (NOK/sqm) | (NOKm) | (NOK/sqm) | (%) | (NOKm) | (NOK/sqm) | |
| Oslo | 41 | 610 033 | 96.7 | 6.3 | 22 382 | 36 690 | 1 327 | 2 175 | 5.5 | 1 315 | 2 155 |
| Trondheim | 9 | 117 187 | 98.2 | 5.9 | 2 501 | 21 339 | 176 | 1 504 | 6.4 | 170 | 1 447 |
| Sandvika | 9 | 94 594 | 91.6 | 10.3 | 2 142 | 22 647 | 118 | 1 247 | 5.0 | 125 | 1 321 |
| Stavanger | 6 | 79 078 | 92.2 | 9.5 | 2 076 | 26 257 | 128 | 1 617 | 5.6 | 134 | 1 694 |
| Drammen | 8 | 70 067 | 94.7 | 8.5 | 1 874 | 26 746 | 114 | 1 623 | 5.7 | 106 | 1 516 |
| Bergen | 6 | 57 119 | 98.8 | 5.0 | 1 268 | 22 196 | 89 | 1 566 | 6.3 | 95 | 1 656 |
| Kristiansand | 7 | 45 158 | 92.9 | 9.9 | 665 | 14 718 | 51 | 1 139 | 6.7 | 54 | 1 185 |
| Other | 1 | 5 531 | 93.5 | 4.3 | 63 | 11 472 | 7 | 1 182 | 8.9 | 7 | 1 195 |
| Management portfolio |
87 | 1 078 767 | 96.1 | 6.8 | 32 971 | 30 564 | 2 010 | 1 863 | 5.6 | 2 004 | 1 858 |
| Project portfolio | 6 | 98 941 | 13.9 | 1 704 | 17 226 | ||||||
| Development sites | 5 | 126 711 | 2.2 | 516 | 4 069 | ||||||
| Property portfolio | 98 | 1 304 418 | 7.2 | 35 191 | 26 978 |
Youngsgt. 7-9 is included in market value of the management portfolio at sales price of 60 million.
The calculation of net yield is based on the valuers' assumption of ownership costs, which at 30.09 corresponds to 8.1 per cent of market rent.
The below table reconciles the individual balance sheet items to the property market value presented above.
| Property market value | 35 191 | 28 756 | 29 599 |
|---|---|---|---|
| Other | -5 | -62 | -7 |
| Properties and housing-units held for sale | 702 | 576 | 617 |
| Investment properties held for sale | 138 | 150 | 165 |
| Investment property | 34 356 | 28 093 | 28 823 |
| All figures in NOK millions | Q3-16 | Q3-15 | 2015 |
During the third quarter, Entra signed new and renegotiated leases with an annual rent totalling 118 million (60,000 square metres) and received notices of termination on leases with an annual rent of 22 million (8,400 square metres). The impact in rent from the total amount of renegotiated contracts signed
within the quarter was negative with -0.4 per cent. Net letting was 44 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.
Entra has invested 237 million in the portfolio of investment properties in the third quarter. In addition, Entra has invested 125 million through its non-consolidated jointly controlled entities (250 million on a 100 per cent basis). In addition, Entra has acquired the Skøyen portfolio in Oslo and Lars Hillesgate 25 in Bergen for a total of 2,582 million in the third quarter 2016 and Entra has sold the properties Fritzners gate 12 in Oslo and Telemarksgata 11 in Skien of a total consideration of 64 million.
| Ownership (%) |
Location | Expected completion |
Project area ('000 sqm) |
Occupancy (%) |
Estimated total project cost* (NOKm) |
Of which accrued* (NOKm) |
Yield on cost** |
|
|---|---|---|---|---|---|---|---|---|
| Group: | ||||||||
| Strømsveien 96 | 100 | Oslo | Dec-16 | 18 100 | 48 | 433 | 337 | 6.6 |
| Cort Adelers gate 30 | 100 | Oslo | Dec-16 | 4 700 | 100 | 162 | 134 | 6.3 |
| Powerhouse Kjørbo, block 3 | 100 | Sandvika | Jul-17 | 4 200 | 54 | 144 | 101 | 5.6 |
| Trondheimsporten | 100 | Trondheim | Nov-17 | 28 600 | 77 | 680 | 360 | 6.4 |
| Total Group | 55 600 | 1 419 | 932 | |||||
| Jointly controlled companies: | ||||||||
| Sundtkvartalet | 50 | Oslo | Dec-16 | 31 300 | 64 | 1 056 | 946 | 6.9 |
| MediaCity Bergen | 50 | Bergen | Aug-17 | 45 000 | 73 | 1 830 | 1 385 | 6.1 |
| Total Jointly controlled companies | 76 300 | 2 886 | 2 331 |
* 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)
At Strømsveien 96 in Oslo, the refurbishment of 18,100 square metres (12,500 sqm offices) is on-going. Completion of the facade and internal work are the main ongoing activities and functional testing of technical systems has commenced. The Norwegian Medicines Agency will be one of the tenants, letting approximately 6,500 square metres. The building will obtain a BREEAM Very Good classification and energy class B. The project will be completed in December 2016.
Cort Adelersgate 30 in Oslo is under refurbishment with completion in December 2016. Entra has signed a 10 year lease contract with the Oslo Municipality Education Authority for 4,750 sqm and the building is fully let. Main activities in the period have been work on technical installations and interior work.
In December 2015, Entra purchased the development project "Trondheimsporten", a new-build project centrally located in Holtermanns veg 70 in Trondheim. When completed, the property will be a 15-floor building of approx. 28,600 sqm. office/education and parking. The property is 77 per cent prelet to Trondheim municipality and the Norwegian Labour and Welfare Administration on 10-year contracts. The tenants have options to let the remaining areas in the building. Construction started in January 2016. The building is expected to be finalised during the fourth quarter of 2017 with a BREEAM Very Good classification. During the quarter, the construction works up until the fifth floor is completed, and technical installations have started.
In Sandvika Entra is refurbishing the third block at Kjørbo into a new Powerhouse with a BREEAM Excellent classification. A Powerhouse shall during its lifetime produce more renewable energy than it uses for materials, production, operation, renovation and demolition. The property is 4,200 sqm and is 54 per cent pre-let to Asplan Viak.
Sundtkvartalet in Oslo is a new, environmentally leading office building of approximately 31,300 sqm. The project is in the final faze, and will be completed in December 2016. 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. A new lease contract with KnowIt for 4,400 sqm/10 years has been signed in the quarter.
Media City Bergen, in Lars Hilles gate 30 in Bergen, includes total renovation of approximately 35,000 sqm and an extension of approximately 10,000 sqm. 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, technology, education and research companies/ organisations. The largest media companies such as 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. Interior work at tower 3 is completed during Q3 and testing of technical systems will start. At tower 1 and 2, interior work is on-going. The project will be completed in August 2017.
In July 2015, Wintershall exercised its option to acquire the property project Gullfaks in Stavanger. Gullfaks is a 17,900 sqm office building at Hinna Park in Stavanger. The transaction also includes part of an underground car park. The property is 50 per cent owned by Entra through Hinna Park Eiendom AS. The project was completed in the beginning of August in accordance with the plan and Winterhall has moved in to the new building. Closing has been completed at the end of October 2016.
Youngskvartalet in Oslo involves both a new building and refurbishment of three existing buildings. The project consists of 9,400 sqm and will be finalised in Q4 2017. The project is forward sold to Industri Energi as part of a larger transaction that took place in 2012 where Entra booked a total gain of 134 million. When finalized, Entra will deliver the project at cost plus a project management fee. Total project cost (incl. land) is approximately 340 million.
Entra actively seeks to improve the quality of its property portfolio through a disciplined strategy of acquisitions and divestments. Entra focuses on acquisition of large properties and projects in specific areas within our four core markets; Oslo, Bergen, Trondheim and Stavanger. Target areas include areas in the city centers and selected clusters and communication hubs outside the city centers, allowing Entra to offer rental opportunities at a price 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 meet these acquisition criteria. Also, Entra actively divests smaller properties and properties outside its core markets. The acquisition and divestment strategy is flexible, allowing Entra to respond to market opportunities as they arise.
Closing of the Skøyen transaction comprising three high quality assets of about 61,000 sqm gross area, took place on 1 September 2016.
| Transaction | Transaction | ||||
|---|---|---|---|---|---|
| Purchased properties | Area | quarter | No of sqm | value (NOKm) | Closing date |
| Skøyen portfolio (three properties) | Oslo | Q2 2016 | 61 000 | 2 529 | 01.09.2016 |
| Land plot, Lars Hillesgate 25 | Bergen | Q2 2016 | TBD | 53 | 01.09.2016 |
| Office part of Oslo City* | Oslo | Q4 2015 | 40 250 | 1 650 | 31.12.2015 |
| Trondheimsporten | Trondheim | Q4 2015 | 28 600 | 163 | 18.12.2015 |
| Sum | 129 850 | 4 395 |
| Transaction | Transaction | ||||
|---|---|---|---|---|---|
| Sold properties | Area | quarter | No of sqm | value (NOKm) | Closing date |
| Kalfarveien 31 | Bergen | Q2 2016 | 8,440 | 85 | 01.11.2016 |
| Fritznersgate 12 | Oslo | Q2 2016 | 824 | 53 | 15.09.2016 |
| Telemarksgata 11 | Skien | Q2 2016 | 4 300 | 11 | 01.07.2016 |
| Ringstabekk AS** | Bærum | Q1 2016 | 5 570 | 114 | 06.04.2016 |
| Strandveien 13, Tromsø | Tromsø | Q4 2015 | 11 560 | 158 | 28.01.2016 |
| Tollbugata 2, Bodø | Bodø | Q4 2015 | 940 | 14 | 01.12.2015 |
| Hans Kiersgate 1 b and c | Drammen | Q4 2015 | 2 230 | 11 | 30.10.2015 |
| Kirkegata 2 B | Arendal | Q3 2015 | 5 800 | 33 | 30.09.2015 |
| Gullfaks, Hinna Park (forward sale) | Stavanger | Q3 2015 | 17 900 | Est. 700 | 30.10.2016 |
| Keysersgate 15 | Oslo | Q1 2015 | 315 | 16 | 01.03.2015 |
| Portfolio of six properties | Moss, Skien, Lillestrøm | Q1 2015 | 62 918 | 1 375 | 24.02.2015 |
| Grønnegaten 122 | Tromsø | Q4 2014 | 6 600 | 72 | 07.04.2015 |
| Skansegaten 2 | Stavanger | Q4 2014 | 4 379 | 110 | 09.01.2015 |
| Sum | 131 776 | 2 751 |
* Included 50 per cent of parking basement
** Commercial areas included in number of sqm (residential not included)
Entra selectively gains access to development projects through its shareholding in subsidiaries with non-controlling interests and jointly controlled entities. Entra's ownership interests currently include the following companies:
Entra and Drammen Municipality own Papirbredden Eiendom AS. The company owns six office properties and a future development potential for around 39,000 sqm in Drammen.
Entra and Camar Eiendom own Hinna Park Eiendom AS. The company owns three office properties and development potential for two new office properties totalling around 29,300 sqm. The company also owns the project Gullfaks that was completed as planned at the beginning of August 2016 and handed over to Wintershall at the end of October 2016..
Entra and Oslo Pensjonsforsikring (OPF) own Entra OPF Utvikling AS. The company owns two properties in Bergen of which one is the project property MediaCity Bergen in Lars Hilles gate 30. According to the agreement between Entra and Oslo Pensjonsforsikring, Entra OPF Utvikling AS is not to be financed with debt, any capital requirements are thus to be financed with equity contributions from the owners.
Entra and Skanska Commercial Development own Sundtkvartalet Holding AS. The company will build a new office building of approximately 31,000 square meters as described under the project development section above.
Entra and Steen & Strøm own Oslo City Parkering AS. The company owns the parking basement of the property Oslo City.
OSU is a property development company that is undertaking the development of parts of the city district Bjørvika in Oslo. Entra's share of the market value of the properties and projects in OSU is estimated at approximately 1.4 billion as of 30.09.16. The estimate is based on valuations from two external appraisers. Entra's share of the net asset value as at 30.09.16 was 0.7 billion after taking into account estimated latent deferred tax of 10 per cent.
| Papirbredden | Hinna Park | Sum consolidated |
Entra OPF | Sundtkvartalet | Oslo S | Oslo City | Sum associated companies & |
||
|---|---|---|---|---|---|---|---|---|---|
| All figures in NOK millions | Eiendom AS | Eiendom AS | companies | Utvikling AS | Holding AS | Utvikling AS | Parkering AS | Other | JVs |
| Share of ownership (%) | 60 | 50 | 50 | 50 | 33 | 50 | 33 | ||
| Rental income | 69 | 60 | 130 | 14 | 0 | 65 | 12 | 66 | 158 |
| Net operating income | 68 | 52 | 120 | 9 | -1 | 65 | 10 | 65 | 148 |
| Net income | 42 | 22 | 64 | 7 | -3 | 19 | 10 | 63 | 98 |
| Changes in value of investment properties |
144 | -46 | 98 | 67 | 13 | 0 | 5 | 0 | 85 |
| Changes in value of financial instruments |
3 | 6 | 9 | 0 | 0 | 47 | 0 | 0 | 47 |
| Profit before tax | 189 | -18 | 171 | 74 | 10 | 67 | 16 | 63 | 229 |
| Tax | -47 | 4 | -43 | -19 | -3 | 1 | -4 | -16 | -40 |
| Profit for period/year | 141 | -14 | 128 | 56 | 7 | 68 | 12 | 47 | 190 |
| Non-controlling interests Entras share of profit |
57 | -7 | 50 | 28 | 4 | 23 | 6 | 16 | 76 |
| Book value | 757 | 161 | 513 | 148 | 6 | 1 585 | |||
| Market value properties | 1 625 | 1 037 | 2 662 | 1 575 | 1 113 | 3 914 | 295 | 6 898 | |
| Entras share of market value properties |
975 | 519 | 1 493 | 788 | 557 | 1 305 | 147 | 2 797 |
The transaction market is highly active and characterised by high demand for properties in the largest cities. There has been almost as many transactions in 2016 as in 2015, however there has been relatively few large transactions/portfolio sales. The total transaction volume is thus down at more normalised levels. The demand surplus in the market is pushing yields further down and prime yield is now down at 3.9 per cent according to Entra's consensus report, summarising inputs from leading Norwegian commercial property brokers and analysts.
Source: Entra Consensus report
The Office vacancy in Oslo is expected to drop to 7.8 per cent by the end of 2016 and 7.2 per cent in 2017 according to Entra's consensus report. A slight increase in rents for modern offices in the city centre is observed, a trend which is expected to continue in 2017 and 2018 due to low construction activity, office to residential conversion and increasing employment.
In Bergen and Stavanger, the office vacancy seems to be levelling out at about 10 per cent. Stavanger the numbers are uncertain due to potential hidden vacancy. The negative impact from reduced activity in the oil and gas industry seems to be flattening out. In Trondheim the office vacancy may increase above 10 per cent due to high construction activity.
Rent levels in the centre of Bergen is slightly up due to more high quality office space being offered in the market combined with relatively low office vacancy. The office vacancy in Bergen is mainly related to properties situated around the oil and gas intensive office areas at Kokstad / Sandsli / Flesland. Rent levels in the city centre of Trondheim remain stable. The office vacancy in city centre of Trondheim is 6-8 per cent. In Stavanger there has been increasing activity in the office letting market. However, Stavanger is still experiencing downward pressure on rent levels due to significant vacancy.
Overall, we see relatively low office vacancy and stable or slightly increasing rent levels in the city centres. Entra is in a good position with a portfolio located in central areas of the four largest cities and its long lease contracts with solid tenants.
| 2013 | 2014 | 2015 | 2016e | 2017e | 2018e | |
|---|---|---|---|---|---|---|
| Vacancy Oslo and Bærum (%) | 7.4 | 7.8 | 8.4 | 7.8 | 7.2 | 6.8 |
| Rent per sqm, high standard Oslo office | 2 907 | 3 025 | 2 935 | 2 956 | 3 065 | 3 185 |
| Prime yield (%) | 5.2 | 4.7 | 4.1 | 3.9 | 3.9 | na |
Source: Entra Consensus report
At 30.09.16, the Group had 166 employees. During the quarter, there were no injuries that caused absence from work. 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 1.7 at the end of the period vs 3.9 at the end of the previous quarter.
The Group is exposed to financial risk through its 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 rate hedging instruments. Liquidity/ refinancing risk is reduced by entering into long-term loan agreements, 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.
Business and strategic risks include the possible impact on the Group's operations of political decisions, regulations and significant unforeseen non-recurring events. Entra will be exposed to property tax on a majority of its properties in Oslo from 2017.
Entra carries out major upgrading and development projects involving risks in relation to deadlines and costs.
There has been no significant events after the balance sheet date.
Entra's share capital is NOK 183,732,461 divided into 183,732,461 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 21.10.16, Entra had 5,870 shareholders. Norwegian investors held 61 per cent of the share capital and foreign investors 39 per cent.
On 15 September 2016 the Norwegian Ministry of Trade, Industry and Fisheres, sold a total of 30 million shares through a secondary placement.
The 10 largest shareholders as of 21.10.16 were:
| Shareholder | % holding |
|---|---|
| Norwegian Ministry of Trade, Industry and Fisheries |
33.4 |
| Folketrygdfondet | 8.8 |
| Geveran Trading | 8.2 |
| State Street Bank (Nominee) | 2.6 |
| Danske Invest Norske | 2.1 |
| The Bank of New York (Nominee) | 1.8 |
| JP Morgan Bank Luxemburg (Nominee) | 1.4 |
| The Bank of New York (Nominee) | 1.4 |
| Danske Invest Norske | 1.1 |
| State Street Bank (Nominee) | 1.0 |
| SUM 10 LARGEST SHAREHOLDERS | 61.7 |
The Norwegian economy is still influenced by a weaker macroeconomic development and general uncertainty even though one over several quarters has seen positive development in certain key macro indicators.
The downturn in the oil sector and related industries has primarily had a negative impact in the southern and western part of Norway, and sub markets with a high level of oil sector exposure are experiencing increasing vacancies and pressure on rents. Entra is in a relatively good position having low exposure to the geographical areas being hit by the downturn, long lease contracts with solid tenants and a low exposure towards the oil sector.
In Oslo, that constitutes around 66 per cent of Entra's revenues, we expect vacancy levels to have peaked and to see a falling trend going forward as net new office space coming into the market in 2017 and 2018 is marginal due to low new building activity and high conversion from commercial to residential buildings. The slight decrease in market rent levels in previous quarters has flattened out, and we expect a positive trend from 2017.
Modern offices located near public transportation are attractive and obtain solid rents compared to premises located in less central areas.
The good credit availability and historically low market interest rates for all maturities has continued. The volatility and uncertainty in the financial markets is high, but Entra, with its strong balance sheet and predictable cash flow, is in a very good position to secure favourable financing also going forward.
Property investors seek quality properties with good locations and long and secure cash flows. The yield compression in the Norwegian market is expected to level out. However, Entra's portfolio with a healthy mix of attractive properties and value enhancing development projects should provide a continued positive value development, albeit at a significantly slower pace.
With its flexible properties in attractive locations, strong tenant base with long lease contracts, exciting project pipeline and solid financial position, the Board believe that Entra is well positioned for the future.
Oslo, 31 October 2016
The Board of Entra ASA
| All figures in NOK millions | Q3-16 | Q3-15 | YTD Q3-16 | YTD Q3-15 | 2015 |
|---|---|---|---|---|---|
| Rental income | 477 | 459 | 1 393 | 1 322 | 1 760 |
| Repairs & maintenance | -14 | -17 | -30 | -33 | -56 |
| Operating costs | -28 | -31 | -78 | -91 | -129 |
| Net operating income | 435 | 411 | 1 285 | 1 198 | 1 574 |
| Other revenue | 71 | 20 | 184 | 212 | 240 |
| Other costs | -65 | -17 | -174 | -197 | -224 |
| Administrative costs | -38 | -36 | -110 | -123 | -168 |
| Share of profit from associates and JVs | 57 | -13 | 76 | 29 | 44 |
| Net realised financials | -145 | -120 | -418 | -514 | -625 |
| Net income | 315 | 245 | 844 | 606 | 840 |
| - of which net income from property management | 260 | 258 | 797 | 579 | 799 |
| Changes in value of investment properties | 374 | 522 | 1 123 | 1 415 | 1 818 |
| Changes in value of financial instruments | 68 | -86 | -135 | 337 | 417 |
| Profit before tax | 757 | 681 | 1 831 | 2 358 | 3 075 |
| Tax payable | 0 | 0 | 0 | 0 | 0 |
| Change in deferred tax | -175 | -188 | -425 | -411 | -354 |
| Profit for period/year | 582 | 492 | 1 407 | 1 947 | 2 721 |
| Actuarial gains and losses | -28 | 4 | -28 | 4 | 39 |
| Change in deferred tax on comprehensive income | 7 | -1 | 7 | -1 | -10 |
| Total comprehensive income for the period/year | 562 | 495 | 1 386 | 1 950 | 2 750 |
| Profit attributable to: | |||||
| Equity holders of the Company | 575 | 452 | 1 357 | 1 883 | 2 648 |
| Non-controlling interest | 8 | 41 | 50 | 64 | 73 |
| Total comprehensive income attributable to: | |||||
| Equity holders of the Company | 554 | 454 | 1 336 | 1 885 | 2 677 |
| Non-controlling interest | 8 | 41 | 50 | 64 | 73 |
| All figures in NOK millions | 30.09.2016 | 30.09.2015 | 31.12.2015 |
|---|---|---|---|
| Intangible assets | 162 | 194 | 161 |
| Investment property | 34 356 | 28 093 | 28 823 |
| Other operating assets | 27 | 30 | 35 |
| Investments in associates and JVs | 1 585 | 1 121 | 2 789 |
| Financial derivatives | 574 | 532 | 530 |
| Long-term receivables | 66 | 51 | 53 |
| Total non-current assets | 36 770 | 30 021 | 32 391 |
| Property and housing-units for sale | 676 | 557 | 589 |
| Investment property held for sale | 138 | 150 | 165 |
| Trade receivables | 61 | 42 | 55 |
| Other receivables | 344 | 99 | 206 |
| Cash and bank deposits | 188 | 158 | 212 |
| Total current assets | 1 408 | 1 006 | 1 226 |
| Total assets | 38 178 | 31 027 | 33 618 |
| Shareholders equity | 13 466 | 12 204 | 12 995 |
| Non-controlling interests | 409 | 350 | 359 |
| Total equity | 13 874 | 12 553 | 13 354 |
| Interest-bearing debt | 14 488 | 11 600 | 12 083 |
| Deferred tax liability | 3 698 | 3 363 | 3 324 |
| Financial derivatives | 1 130 | 1 136 | 1 121 |
| Other non-current liabilities | 255 | 203 | 237 |
| Total non-current liabilities | 19 570 | 16 302 | 16 764 |
| Interest-bearing debt | 3 752 | 1 821 | 3 123 |
| Trade payables | 275 | 165 | 142 |
| Other current liabilities | 707 | 184 | 236 |
| Total current liabilities | 4 733 | 2 171 | 3 501 |
| Total liabilities | 24 304 | 18 473 | 20 265 |
| Total equity and liabilities | 38 178 | 31 027 | 33 618 |
| Share capital |
Other paid in capital |
Retained earnings |
Non controlling interest |
Total equity |
|---|---|---|---|---|
| 184 | 3 556 | 7 039 | 286 | 11 064 |
| 2 648 | 73 | 2 721 | ||
| 28 | 28 | |||
| -459 | -459 | |||
| 0 | -6 | -1 | -7 | |
| 0 | 6 | 0 | 6 | |
| 184 | 3 556 | 9 255 | 359 | 13 354 |
| 1 357 | 50 | 1 407 | ||
| -21 | -21 | |||
| -864 | -864 | |||
| -1 | -1 | |||
| 0 | 0 | |||
| 184 | 3 556 | 9 727 | 409 | 13 874 |
| All figures in NOK millions | Q3 16 | Q3 15 | YTD Q3 16 | YTD Q3 15 | 2015 |
|---|---|---|---|---|---|
| Profit before tax | 757 | 681 | 1 831 | 2 358 | 3 075 |
| Net expensed interest and fees on loans | 145 | 158 | 418 | 436 | 645 |
| Net interest and fees paid on loans | -111 | -158 | -390 | -464 | -584 |
| Share of profit from associates and jointly controlled entities | -57 | 13 | -76 | -29 | -44 |
| Depreciation and amortisation | 2 | 4 | 7 | 16 | 18 |
| Changes in value of investment properties | -374 | -522 | -1 123 | -1 415 | -1 818 |
| Changes in value of financial instruments | -68 | 86 | 135 | -337 | -417 |
| Change in working capital | -30 | 2 | -61 | 19 | -26 |
| Net cash flow from operating activities | 263 | 264 | 741 | 584 | 850 |
| Proceeds from property transactions | 64 | 14 | 329 | 1 740 | 1 792 |
| Purchase of investment properties | -2 548 | 0 | -2 547 | 0 | -132 |
| Upgrades of investment properties | -192 | -217 | -539 | -673 | -911 |
| Investment in property and housing-units for sale | -52 | -29 | -177 | -32 | -82 |
| Purchase of intangible and other operating assets | -2 | -5 | -8 | -21 | -41 |
| Net payment financial assets | 0 | 10 | 5 | -6 | -30 |
| Net repayment of loans to associates and JVs | 0 | 0 | 0 | 62 | 62 |
| Net payments in associates and JVs | -42 | -14 | -173 | -69 | -1 720 |
| Dividends from associates and JVs | 51 | 51 | 51 | 51 | 51 |
| Net cash flow from investment activities | -2 721 | -191 | -3 059 | 1 052 | -1 010 |
| Proceeds interest-bearing debt | 6 332 | 7 565 | 14 425 | 11 129 | 19 126 |
| Repayment interest-bearing debt | -3 825 | -7 552 | -11 577 | -12 345 | -18 492 |
| Proceeds from/repayment of equity | 0 | -1 | -1 | -1 | -1 |
| Dividends paid | -19 | 0 | -551 | -459 | -459 |
| Net cash flow from financing activities | 2 488 | 12 | 2 295 | -1 677 | 174 |
| Change in cash and cash equivalents | 31 | 85 | -24 | -40 | 14 |
| Cash and cash equivalents at beginning of period | 158 | 73 | 212 | 198 | 198 |
| Cash and cash equivalents at end of period | 188 | 158 | 188 | 158 | 212 |
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 2015.
The financial reporting covers Entra ASA, subsidiaries, associated companies and jointly controlled entities. The interim financial statements have not been audited.
In the first quarter of 2016 the Group did some changes to how the profit and loss statement is presented in order to better reflect the underlying operational results and to a greater extent be harmonised with how peer companies and equity analysts present their figures. The major changes are:
In addition, some changes in the balance sheet have been done in order to improve the presentation.
The Group is organised into two geographic units: Oslo and Regional Cities. These units are supported by a Letting and Business Development division and a Development and Technology division. In addition, Entra has group and support functions within accounting and finance, legal, procurement, communication and HR.
Each of the geographic units are organised and monitored by management teams in seven geographic areas: Oslo, Trondheim, Sandvika, Stavanger, Drammen, Bergen and Kristiansand.
The geographic units do not have their own profit responsibility. The geographical units are instead followed up on economical and non-economical key figures ("key performance indicators"). These key performance indicators are reported and analysed by geographic area to the chief operating decision maker for the purpose of resource allocation and assessment of segment performance. Hence, the Group report their segment information based upon these seven geographic areas.
| Number | Area | Occupancy | Wault | Market value | 12 months rolling rent | Net yield | Market rent | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (#) | (sqm) | (%) | (year) | (NOKm) | (NOK/sqm) | (NOKm) | (NOK/sqm) | (%) | (NOKm) | (NOK/sqm) | |
| Oslo | 41 | 610 033 | 96.7 | 6.3 | 22 382 | 36 690 | 1 327 | 2 175 | 5.5 | 1 315 | 2 155 |
| Trondheim | 9 | 117 187 | 98.2 | 5.9 | 2 501 | 21 339 | 176 | 1 504 | 6.4 | 170 | 1 447 |
| Sandvika | 9 | 94 594 | 91.6 | 10.3 | 2 142 | 22 647 | 118 | 1 247 | 5.0 | 125 | 1 321 |
| Stavanger | 6 | 79 078 | 92.2 | 9.5 | 2 076 | 26 257 | 128 | 1 617 | 5.6 | 134 | 1 694 |
| Drammen | 8 | 70 067 | 94.7 | 8.5 | 1 874 | 26 746 | 114 | 1 623 | 5.7 | 106 | 1 516 |
| Bergen | 6 | 57 119 | 98.8 | 5.0 | 1 268 | 22 196 | 89 | 1 566 | 6.3 | 95 | 1 656 |
| Kristiansand | 7 | 45 158 | 92.9 | 9.9 | 665 | 14 718 | 51 | 1 139 | 6.7 | 54 | 1 185 |
| Other | 1 | 5 531 | 93.5 | 4.3 | 63 | 11 472 | 7 | 1 182 | 8.9 | 7 | 1 195 |
| Management portfolio |
87 | 1 078 767 | 96.1 | 6.8 | 32 971 | 30 564 | 2 010 | 1 863 | 5.6 | 2 004 | 1 858 |
| Project portfolio | 6 | 98 941 | 13.9 | 1 704 | 17 226 | ||||||
| Development sites | 5 | 126 711 | 2.2 | 516 | 4 069 | ||||||
| Property portfolio | 98 | 1 304 418 | 7.2 | 35 191 | 26 978 |
Youngsgt. 7-9 is included in market value of the management portfolio at sales price of 60 million.
The calculation of net yield is based on the valuers' assumption of ownership costs, which at 30.09 corresponds to 8.1 per cent of market rent.
| Number | Area | Occupancy | Wault | Market value | 12 months rolling rent | Net yield | Market rent | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| (#) | (sqm) | (%) | (year) | (NOKm) | (NOK/sqm) | (NOKm) | (NOK/sqm) | (%) | (NOKm) | (NOK/sqm) | |
| Oslo | 37 | 507 587 | 94.9 | 6.9 | 17 001 | 33 495 | 1 039 | 2 046 | 5.7 | 1 040 | 2 049 |
| Sandvika | 10 | 100 220 | 87.2 | 11.3 | 2 137 | 21 324 | 127 | 1 264 | 5.5 | 129 | 1 282 |
| Drammen | 8 | 61 497 | 99.9 | 9.3 | 1 389 | 22 591 | 92 | 1 500 | 6.2 | 82 | 1 341 |
| Bergen | 6 | 57 119 | 99.1 | 5.5 | 1 144 | 20 030 | 83 | 1 458 | 6.5 | 92 | 1 605 |
| Trondheim | 9 | 117 182 | 94.7 | 6.7 | 2 342 | 19 989 | 168 | 1 432 | 6.4 | 165 | 1 407 |
| Stavanger | 6 | 77 145 | 93.0 | 8.8 | 2 038 | 26 418 | 138 | 1 783 | 6.3 | 135 | 1 749 |
| Kristiansand | 8 | 46 034 | 89.8 | 9.2 | 589 | 12 792 | 48 | 1 052 | 7.2 | 48 | 1 047 |
| Other | 4 | 22 327 | 93.5 | 6.5 | 238 | 10 669 | 25 | 1 103 | 9.0 | 27 | 1 206 |
| Management portfolio |
88 | 989 112 | 94.5 | 7.4 | 26 879 | 27 175 | 1 719 | 1 738 | 5.9 | 1 718 | 1 737 |
| Project portfolio | 3 | 79 633 | 12.4 | 1 428 | 17 934 | ||||||
| Development sites | 6 | 129 711 | 0.2 | 449 | 3 461 | ||||||
| Property portfolio | 97 | 1 198 456 | 7.5 | 28 756 | 23 994 |
Ringstabekk housing project is included in market value of management portfolio at cost price of 34 million. Youngsgt. 7-9 is included in market value of the management portfolio at sales price of 60 million. The calculation of net yield is based on the valuers' assumption of ownership costs,
which at 30.06 corresponds to 7.5 per cent of market rent.
| All figures in NOK millions | Q3-16 | Q3-15 | YTD Q3-16 | YTD Q3-15 | 2015 |
|---|---|---|---|---|---|
| Closing balance previous period | 31 364 | 28 118 | 28 989 | 28 230 | 28 230 |
| Purchase of investment property | 2 582 | 0 | 4 040 | 0 | 213 |
| Investment in the property portfolio | 237 | 134 | 654 | 594 | 807 |
| Capitalised borrowing costs | 3 | 2 | 6 | 21 | 22 |
| Sale of investment property | -66 | -40 | -318 | -1 524 | -1 548 |
| Reclassified to property and housing-units for sale | 0 | -493 | 0 | -493 | -493 |
| Reclassified to construction contracts | 0 | 0 | 0 | 0 | -60 |
| Changes in value of operational lease | -3 | -42 | 2 | -19 | -59 |
| Changes in value of investment properties | 377 | 563 | 1 121 | 1 434 | 1 877 |
| Closing balance | 34 494 | 28 243 | 34 494 | 28 243 | 28 989 |
| Investment property held for sale | 138 | 150 | 138 | 150 | 165 |
| Investment property | 34 356 | 28 093 | 34 356 | 28 093 | 28 823 |
Investment properties held for sale include the properties Molovegen 10 in Bodø and Kalfarveien 31 in Bergen. During the third quarter 2016 Entra had closing for the properties Fritzners gate 12 and Telemarksgata 11. Kalfarveien 31 was sold in the second quarter 2016 and are classified as held for sale until closing later in 2016.
Sale of investment properties relates to the sale of the property Strandveien 13 in Tromsø, Ringstabekkveien 105 in Bærum, Fritzners gate 12 in Oslo and Telemarksgata 11 in Skien.
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 property is classified as an investment property under IAS 40 and is valued at 679 million (671 million) at the end of the third quarter of 2016. 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 arbitration proceedings or disputes with Norwegian Datasenter Group AS/ Greenfield Property AS and Evry ASA.
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 the hearing of the dispute will take place in February 2017.
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 disagrees with the verdict and the ruling has been appealed. The hearing of the dispute took place in October 2016, and the verdict is expected in the fourth quarter 2016.
Entra has not made any provision for the claims as the Group considers it not probable that an outflow of resources will be required.
The valuation methods and principles are unchanged in the quarter. See the annual financial statements for 2015 for further information. Set out below is a summary of assets and liabilities measured at fair value divided between the different valuation hierarchies set out in IFRS 7.
With the exception of equity capital instruments of 0.5 million (level 3) all assets and liabilities are level 2. Investment properties of 34,494 million are classified at level 3.
| All figures in NOK millions | 30.09.2016 | 30.09.2015 | 31.12.2015 |
|---|---|---|---|
| Assets measured at fair value: | |||
| Assets measured at fair value with change over the result | |||
| - Investment property | 34 356 | 28 093 | 28 823 |
| - Investment property held for sale | 138 | 150 | 165 |
| - Derivatives | 574 | 532 | 530 |
| Financial assets held for sale | |||
| - Equity instruments | 1 | 1 | 1 |
| Total | 35 069 | 28 775 | 29 520 |
| Liabilities measured at fair value: | |||
| Financial liabilitites measured at fair value with change over the result | |||
| - Derivatives | 1 130 | 1 136 | 1 121 |
| - Bonds | 5 336 | 4 120 | 4 054 |
| - Commercial paper | 2 000 | 600 | 1 900 |
| Total |
| DEBT RATIO (LTV) | |||||
|---|---|---|---|---|---|
| All figures in NOK millions | Q3-16 | Q3-15 | 2015 | ||
| Net nominal interest-bearing debt | 17 516 | 12 843 | 14 640 | ||
| Total market value of the property portfolio | 35 979 | 29 226 | 31 777 | ||
| Market value of the property portfolio | 35 191 | 28 756 | 29 598 | ||
| Share of Entra OPF Utvikling (50%) | 788 | 470 | 525 | ||
| Share of Oslo City Kjøpesenter AS (33,3%) | 0 | 0 | 1 654 | ||
| Debt ratio (LTV) % | 48.7 | 43.9 | 46.1 | ||
| INTEREST COVERAGE RATIO (ICR) | |||||
| All figures in NOK millions | Q3-16 | Q3-15 | YTD Q3-16 | YTD Q3-15 | 2015 |
| Net income | 315 | 245 | 844 | 606 | 840 |
| Depreciation | 2 | 3 | 7 | 16 | 18 |
| Results from associates and joint ventures | -57 | 13 | -76 | -29 | -44 |
| Net realised financials | 145 | 120 | 418 | 514 | 625 |
| EBITDA adjusted | 405 | 381 | 1 193 | 1 107 | 1 440 |
| Share of EBITDA Entra OPF Utvikling | 1 | 2 | 4 | 3 | 5 |
| EBITDA adjusted for share of Entra OPF Utvikling | 406 | 383 | 1 196 | 1 109 | 1 444 |
| Interest cost | 144 | 129 | 413 | 420 | 548 |
| Other finance expense | 9 | 1 | 28 | 12 | 24 |
| Applicable net interest cost | 153 | 130 | 441 | 432 | 572 |
| Interest Coverage Ratio (ICR) | 2.7 | 2.9 | 2.7 | 2.6 | 2.5 |
| All figures in NOK millions | Q3-16 | Q3-15 | 2015 |
|---|---|---|---|
| Total equity | 13 874 | 12 553 | 13 354 |
| Less: Non-controlling interests | 409 | 350 | 359 |
| NAV per financial statement | 13 466 | 12 204 | 12 995 |
| Add: Adjustment to property portfolio | 27 | 20 | 89 |
| Add: Revaluation of investments made in the JV | 198 | 223 | 118 |
| Add: Net market value on financial derivatives | 556 | 604 | 591 |
| Add: Deferred tax arising on revaluation moments | 2 878 | 2 576 | 2 550 |
| EPRA NAV | 17 126 | 15 626 | 16 342 |
| Market value on property portfolio | 35 191 | 28 756 | 29 598 |
| Tax value on property portfolio | 14 381 | 12 386 | 12 476 |
| Basis for calculation of tax on gain on sale | 20 810 | 16 370 | 17 122 |
| Less: Market value of tax on gain on sale (5% tax rate) | 1 041 | 819 | 856 |
| Net market value on financial derivatives | 556 | 604 | 591 |
| Tax expense on realised financial derivatives* | 139 | 163 | 148 |
| Less: Net result from realisation of financial derivatives | 417 | 441 | 443 |
| Book value of interest bearing debt | 18 239 | 13 421 | 15 205 |
| Nominal value of interest bearing debt | 17 704 | 13 001 | 14 851 |
| Basis for calculation of tax on realisation of interest-bearing debt | 536 | 420 | 354 |
| Less: Market value of tax on realisation* | 134 | 113 | 89 |
| EPRA NNNAV | 15 534 | 14 254 | 14 954 |
| All figures in NOK millions | Q3-16 | Q3-15 | YTD Q3-16 | YTD Q3-15 | 2015 |
|---|---|---|---|---|---|
| Profit for period/year - Earnings per IFRS income statement | 582 | 492 | 1 407 | 1 947 | 2 721 |
| Add: | |||||
| Changes in value of investment properties | -374 | -522 | -1 123 | -1 415 | -1 818 |
| Tax on changes in value of investment properties* | 94 | 141 | 281 | 382 | 491 |
| Reversal of deferred tax arising from sales of properties (tax excempted) |
-8 | 0 | -14 | -215 | -218 |
| Changes in value of financial instruments | -68 | 86 | 135 | -337 | -417 |
| Tax on changes in value of financial instruments* | 17 | -23 | -34 | 91 | 112 |
| Profit or losses on disposal of inventory in Oslo S Utvikling | -36 | -3 | -41 | -30 | -38 |
| Share of profit jointly controlled entities – fair value adjustments | -37 | 18 | -42 | -27 | -46 |
| Reversal of deferred tax EPRA adjusments jointly controlled entities |
13 | -3 | 15 | 17 | 24 |
| Net income non-controlling interests of subsidiaries | -10 | -17 | -28 | -31 | -34 |
| Reversal of tax non-controlling interests of subsidiaries | 2 | 5 | 7 | 8 | 8 |
| Significant one-off items | 0 | -30 | 0 | 85 | 85 |
| Tax on significant one-off items | 0 | 8 | 0 | -23 | -23 |
| Change in tax rate | 0 | 0 | 0 | 0 | -252 |
| Tax payable | |||||
| EPRA earnings | 175 | 152 | 563 | 452 | 597 |
| Reversal of tax adjustment above | -117 | -127 | -255 | -260 | -142 |
| Reversal of change in deferred tax from income statement | 175 | 188 | 425 | 411 | 354 |
| Reversal of tax JVs | 11 | 29 | 17 | 18 | 24 |
| EPRA earnings net of tax | 244 | 242 | 750 | 621 | 832 |
* 25 per cent from Q1 2016, 27 per cent previous periods
| 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 | - Net income from property management less tax payable |
| 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 |
| 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 |
| Independent Appraisers | - Akershus Eiendom and DTZ |
| 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 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 entities Entra OPF Utvikling and Oslo City Kjøpesenter AS |
| 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 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 associates and jointly controlled entities |
|
| Net Income from property management |
- Net income from property management is calculated as Net Income less value changes, tax effects and other income and other 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 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 (EPRA) | - 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 |
| 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 |
| 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 |
Arve Regland CEO Phone: + 47 479 07 700 [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]
| Fourth quarter 2016 | 14.02.2017 |
|---|---|
| First quarter 2017 | 27.04.2017 |
| Second quarter 2017 | 12.07.2017 |
| Third quarter 2017 | 19.10.2017 |
| Fourth quarter 2017 | 09.02.2018 |
Head office Biskop Gunnerus gate 14b 0185 Oslo
Postal address Postboks 52, Økern 0508 Oslo
Tel: (+47) 21 60 51 00 Fax: (+47) 21 60 51 01 E-mail: [email protected]
Customer service centre E-mail: [email protected] Tel: (+47) 800 36 872
www.entra.no
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