Quarterly Report • Apr 27, 2017
Quarterly Report
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Central, flexible and environment friendly office properties
Property management
Q1 16 Q2 16 Q3 16 Q4 16 Q1 17
33 mill.
22%
EPRA NAV
EPRA NAV (NOK per share)
| All figures in NOK millions | Q1-17 | Q1-16 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|
| Rental income | 525 | 454 | 1 899 | 1 760 | 1 772 |
| 16% | 3% | 8% | -1% | 9% | |
| Change period-on-period Net operating income |
489 | 429 | 1 740 | 1 574 | 1 624 |
| 14% | 6% | 11% | -3% | 10% | |
| Change period-on-period | |||||
| Net income from property management | 311 | 278 | 1 070 | 799 | 774 |
| Change period-on-period | 12% | 32% | 34% | 3% | 47% |
| Profit before tax | 1 302 | 284 | 3 306 | 3 075 | 1 377 |
| Change period-on-period | 358% | -72% | 8% | 123% | 201% |
| Profit after tax | 1 044 | 221 | 2 722 | 2 721 | 1 026 |
| Change period-on-period | 372% | -77% | 0% | 165% | 120% |
| Market value of the property portfolio* | 36 987 | 29 862 | 35 785 | 29 598 | 28 358 |
| Net nominal interest-bearing debt | 17 631 | 14 515 | 17 454 | 14 640 | 13 890 |
| Loan to value* | 46.4% | 45.2% | 47.6% | 46.1% | 48.4% |
| Interest coverage ratio* | 2.9 | 2.8 | 2.7 | 2.5 | 2.0 |
| Number of shares | 183.7 | 183.7 | 183.7 | 183.7 | 183.7 |
| All figures in NOK per share* | Q1-17 | Q1-16 | 2016 | 2015 | 2014 |
| EPRA NAV | 110 | 90 | 101 | 89 | 76 |
| Change period-on-period | 22% | 11% | 14% | 16% | na |
| EPRA NNNAV | 101 | 82 | 93 | 81 | 68 |
| Change period-on-period | 23% | 12% | 15% | 20% | na |
| EPRA Earnings | 1.24 | 1.07 | 4.27 | 3.25 | 3.00 |
| Change period-on-period | 16% | 40% | 31% | 8% | na |
| Cash earnings/* | 1.69 | 1.52 | 5.80 | 4.96 | 4.10 |
| Change period-on-period | 12% | 32% | 17% | 21% | na |
| Dividend per share**** | 0 | 0 | 3.45 | 3.00 | 2.50 |
| Change period-on-period | 0 | 0 | 15% | 20% | 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.
**** In 2016 Entra ASA started with semi-annual payments of dividends. Dividends in 2016 of 3.45 per share constitute of dividend approved and paid in 2016 for the first half year 2016 and dividend approved not yet paid for the second half of 2016.
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 increased with 16 per cent from 454 million in Q1 16 to 525 million in Q1 17. The increased rental income can be explained by the factors in the below income bridge.
| Rental income 525 |
|
|---|---|
| Like-for-like growth 16 |
|
| Other 3 |
|
| Disposals -7 |
|
| Acquisitions 58 |
|
| Development projects 3 |
|
| Rental income previous period 454 |
|
| Q116 All figures in NOK millions Q117 |
The increase in rental income from the first quarter last year is mainly driven by two large acquisitions; Oslo City, which was fully consolidated from the second quarter 2016, and the purchase of the Skøyen portfolio with effect from the third quarter in 2016. The increase is partly offset by the sale of non-core properties during 2016.
On a like-for-like basis the rental growth was 3.6 per cent compared to the same quarter last year, which equals the annual indexation of the lease contracts. Near all of Entra´s lease contracts are 100 per cent linked to positive changes in CPI. The annual adjustment is mostly made on a November to November basis.
Average 12 months rolling rent per square meter was 1,944 (1,773) as of 31.03.2017. The increase is mainly related to portfolio rotations towards more high quality assets, hereunder the acquisitions of Oslo City and the Skøyen portfolio combined with divestments of non-core properties.
RENT (12M ROLLING) PER SQM AND OCCUPANCY RATE
The occupancy rate increased to 97.5 per cent (94.7 per cent). The rental value of vacant space as of 31.03.17 was approximately 53 million (93 million) on an annualised basis. Gross letting including re-negotiated contracts was 145 million in the quarter of which 17 million is attributable to letting in the project portfolio. Lease contracts with a total value of 76 million in annual lease were terminated in the quarter, mainly related to the lease contract with the Norwegian Directorate of Health in Universitetsgaten 2 and Pilestredet 28 in Oslo, not being renewed following the expiry date of 30.09.18 in Universitetsgaten 2 and 30.06.2021 in Pilestredet 28. Net letting defined as new lease contracts plus lease-up on renegotiated contracts less terminated contracts came in at -34 million (25 million). 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. 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 36 million (25 million) in the quarter and is split as follows:
| All figures in NOK millions | Q1- 17 |
Q1- 16 |
|---|---|---|
| Maintenance | 6 | 2 |
| Tax, leasehold, insurance | 14 | 6 |
| Letting and prop. adm. | 12 | 6 |
| Direct property costs | 4 | 10 |
| Total property costs | 36 | 25 |
The main increase in property cost is related to the introduction of property tax in Oslo which in the first quarter amounted to approximately 6 million.
As a consequence of the effects explained above, net operating income from property management came in at 489 million (429 million) in the quarter.
Other revenue were 61 million (58 million) and other costs were 59 million (54 million). Other revenue of 50 million is 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 income and other costs based on the completion level. Other costs associated with the project amounted to 48 million.
Other revenue also consists of income from services provided to tenants and other costs also consists of other property costs mainly related to rental expenses.
Administrative costs amounted to 43 million (44 million) in the quarter.
Entra`s share of profit from associates and JVs were 124 million (8 million) and is composed as follows:
| All figures in NOK millions | Q1- 17 |
Q1- 16 |
|---|---|---|
| Income from property management | 3 | 22 |
| Changes in market value | 158 | -7 |
| Tax | -38 | -4 |
| Other income and costs | 2 | -3 |
| Results from associates and JVs | 124 | 8 |
The increase in results from associates and JVs compared to first quarter last year is explained by positive value change in particularly Entra OPF and Sundtkvartalet. The value changes are related to signing new lease contracts in the ongoing project in Lars Hillesgate 30 (MCB) in Bergen, and the completion of the project in Sundtkvartalet in Oslo combined with a new lease contract with IBM.
For a more detailed breakdown of the results from associates and JVs see the section on Partly owned companies.
Net realised financials amounted to -141 million (-133 million) and is composed as follows:
| All figures in NOK millions | Q1- 17 |
Q1- 16 |
|---|---|---|
| Interest and other finance income | 7 | 2 |
| Interest and other finance expense | -148 | -135 |
| Net realised financials | -141 | -133 |
Net realised financials has increased slightly compared to the same quarter last year as interest-bearing debt has increased with approximately 3.3 billion partly offset by a decrease of the average interest rate to 3.3 per cent (3.6 per cent) as at 31.03.17. The decrease in the average interest rate is explained by lower market interest rates on floating rate debt.
Net income came in at 432 million (265 million). When including only the income from property management in the results from JVs the actual net income from property management were 311 million (278 million), representing a y-o-y increase of 12 per cent.
| Other income and costs Net income from property management |
2 311 |
-3 278 |
|---|---|---|
| Tax from associates and JVs | -38 | -4 |
| Value changes in associates and JVs | 158 | -7 |
| Less: | ||
| Net income | 432 | 265 |
| All figures in NOK millions | Q1- 17 |
Q1- 16 |
(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 870 million (182 million). About 560 millions is explained by further yield compression and increase in market rents, primarily in the Oslo portfolio. In addition, about 211 million is attributable to value changes in the project portfolio, mainly explained by increased occupancy and reduced risk as each project is moving towards completion. 131 million of the value changes relates to new and renegotiated lease contracts signed in the quarter, while about - 72 million is explained by the termination of lease contracts in the period. The remaining 40 million relates to other changes in the portfolio.
Net changes in value of financial instruments was 0 (-162 million) in the quarter. The Group has an underlying positive value change of 12 million mainly explained by reduced time to maturity on
interest rate swaps offset by termination costs of 12 million for two swap contracts.
The change in deferred tax was -258 million (-63 million) in the quarter. The current tax rate is 24 per cent. However, the effective tax rate is less than the corporate income tax, mainly due to sales of properties without tax effect. 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 yearend 2016, the tax loss carry forward for the Group was 953 million.
Profit before tax was 1,302 million (284 million) in the quarter, while profit after tax was 1,044 million (221 million) which also equals the comprehensive income for the period.
EPRA Earnings amounted to 228 million (197 million) in the first quarter of 2017. The increase in EPRA earnings in the first quarter 2017 is mainly related to increased rental income.
EPRA Earnings before tax amounted to 297 million (263 million) in the first quarter 2017.
Further information about the EPRA Earnings calculations can be found on page 27.
The Group's assets amounted to 40,495 million (34,063 million) as at 31.03.17. Of this, investment property amounted to 36,327 million (29,070 million) and investment property held for sale to 675 million (148 million). Seven (three) properties were classified as held for sale as at 31.03.17. Intangible assets were 124 million (161 million) at the end of the quarter of which 109 million is goodwill related to Hinna Park in Stavanger.
Investments in associates and jointly controlled entities were 1,764 million (2,877 million). The decrease is mainly attributable to the establishment of Oslo City Kontor AS and Oslo City Parkering 2 AS as 100 per cent owned companies subsequent to demergers completed in 2016.
Other receivables was 531 million (238 million) at the end of the first quarter 2017 of which Youngskvartalet amounts to 374 million. The increase in other receivables from first quarter last year was affected by capitalised construction costs of 230 million, of which 49 million is capitalised in the first quarter of 2017, related to the property in Youngskvartalet that will be delivered to the buyer in the fourth quarter of 2017. The Group held 381 million (136 million) in cash and cash equivalents at 31.03.17. In addition the Group has 5,060 million (3,631 million) in unutilised credit facilities.
The Group had interest bearing debt of 18,443 million (15,096 million) as of 31.03.17. The increase is mainly explained by the acquisition of Skøyen portfolio for approximately 2.5 billion in 2016.
Book equity totaled 16,163 million (13,575 million), representing an equity ratio of 40 per cent (40 per cent). Book equity per share was 88 (74). Equity per share was 110 (90) based on the EPRA NAV standard and 101 (82) based on EPRA NNNAV. Outstanding shares at 31.03.17 totalled 183.7 million (183.7 million).
Net cash flow from operating activities came to 250 million (277 million) for the first quarter of 2017. The change mainly relates to changes in working capital compared to the same quarter last year.
The net cash flow from investment activities was -427 million (- 147 million). Proceeds from property transactons of 151 million (162 million) was mainly related to sales of Moloveien 10 in Bodø and Kalfarveien 31 in Bergen. In the first quarter of 2016 the amount mainly related to to the sale of Strandveien 13 in Tromsø of 158 million and three apartments at Ringstabekk.
Pruchase of investment properties of 156 million (0) relates to the purchase of Kristian Augustsgate 13.
The cash effect from investment in and upgrades of investment properties amounted to 297 million (132 million) in the quarter. Investment in property and housing-units for sale of 39 million (100 million) is mainly related to investments in the property Youngskvartalet in Oslo.
Net payment of loans to associates and jointly controlled entities of - 8 million (0) mainly relates to loan provided to the jointly controlled entity Sundtkvartalet AS and net payments in associated and jointly controlled entities of -78 million (-80 million) relates to a capital increase in Entra OPF.
Net cash flow from financing acitivites was 314 million (-206 million) and was mainly related to net repayment of -1,336 million in bank debt, net increase of 500 million in commercial paper and bond issues of 1,150 million.
The net change in cash and cash equivalents was 138 million (- 76 million) in the quarter.
During the first quarter, Entra's total interest-bearing nominal debt increased by 315 million to 18,012 million. The change in interest-bearing debt were composed by bond issues totalling 1,150 million and increased commercial paper financing of 500 million, partly offset by reduced bank debt of 1,335 million.
In the quarter, Entra issued its second green bond with a tenor of seven years and a principal of 750 million. Furthermore, a fixed rate bond (maturity 13.06.2022) was reopened through two issues, totalling 400 million. Commercial paper loans were issued for a total of 1.600 million.
As at 31.03.17 net interest-bearing nominal debt after deduction of liquid assets of 381 million was 17,631 million (14,515 million).
The average remaining term for the Group's debt portfolio was 4.4 years at 31.03.17 (4.3 years as at 31.03.16). 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, 78 per cent (57 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) | 2 200 | 0 | 0 | 0 | 0 | 2 200 |
| Bonds (NOKm) | 1 529 | 1 200 | 1 700 | 700 | 6 650 | 11 779 |
| Bank loans (NOKm) | 62 | 750 | 1 500 | 1 021 | 700 | 4 033 |
| Total (NOKm) | 3 791 | 1 950 | 3 200 | 1 721 | 7 350 | 18 012 |
| Commercial paper (%) | 58 | 0 | 0 | 0 | 0 | 12 |
| Bonds (%) | 40 | 62 | 53 | 41 | 90 | 65 |
| Bank loans (%) | 2 | 38 | 47 | 59 | 10 | 22 |
| Total (%) | 100 | |||||
| Unutilised credit facilities (NOKm) | 1 750 | 0 | 1 000 | 2 310 | 0 | 5 060 |
| Unutilised credit facilities (%) | 35 | 0 | 20 | 46 | 0 | 100 |
| Sources of financing | NOKm | % | ||||
| Bonds | 11 779 | 65 | ||||
| Bank loans | 4 033 | 22 |
| 31.03.2017 | Target | |
|---|---|---|
| Loan-to-value (LTV) | 46.4 | Approx. 50% |
| Interest coverage ratio (ICR) | 2.9 | Min. 1.65x |
| Debt maturities <12 months | 21% | Max 30% |
| Maturity of hedges <12 months | 49% | Max 50% |
| Average time to maturity (hedges) | 3.9 | 2-6 years |
| Financing commitments next 12m | 133% | Min. 100% |
| Average time to maturity (debt) | 4.4 | Min. 3 years |
Commercial paper 2 200 12 Total 18 012 100
The average interest rate of the debt portfolio was 3.3 (3.6) per cent as at 31.03.17. 51 per cent (55 per cent) of the Group's financing was hedged at a fixed interest rate as at 31.03.17 with a weighted maturity of 3.9 years (3.6 years).
During the quarter, Entra has terminated two old and expensive interest rate swaps with a total notional amount of NOK 150 million. The swaps had an weighted average interest rate and
| The Group's total debt in millions: | 18 012 |
|---|---|
| The Group's average interest rate¹ | 3.33% |
time to maturity of 5.6 per cent and 1.7 years, respectively. The termination fee paid amounted to NOK 12 million.
The Group manages interest rate risk through floating-to-fixed interest rate swaps and fixed rate bonds. The table below shows the maturity profile and contribution from these fixed rate instruments, as well as the maturity profile for credit margins on debt.
| Average credit | Fixed rate instruments² | |||||
|---|---|---|---|---|---|---|
| Amount (NOKm) |
Tenor (years) |
Interest rate (%) |
Amount | Interest rate (%) |
Amount (NOKm) |
|
| <1 year | ||||||
| 1-2 years | ||||||
| 2-3 years | ||||||
| 3-4 years | ||||||
| 4-5 years | ||||||
| 5-6 years | ||||||
| 6-7 years | ||||||
| 7-8 years | ||||||
| 8-9 years | ||||||
| 9-10 years | ||||||
| >10 years | ||||||
| 18 012 | 6.9 | 2.1 | 4 050 | 3.4 | 9 642 | Total |
| 7 212 1 750 1 700 700 1 000 1 700 2 850 0 0 0 1 100 |
7.3 6.6 |
2.2 2.0 |
Forward starting swaps³ 2 000 2 050 |
4.5 3.7 3.8 4.1 4.5 2.2 1.9 2.7 0.0 4.4 5.6 |
482 1 900 900 1 800 550 1 350 1 250 900 0 110 400 |
¹Average reference rate (nibor) is 1.10 per cent as of the reporting date.
²Excluding forward starting swaps and credit margins on fixed rate bonds (credit margins are displayed in the table to the right).
³The table displays future starting point, notional principle amount, average fixed rate and tenor for forward starting swaps.
Entra´s management portfolio consists of 84 buildings with a total area of approximately 1.1 million square metres. As of 31.03.17, the management portfolio had a market value of around 34.7 billion. The occupancy rate was 97.5 per cent (94.7 per cent). The weighted average unexpired terms for the Group's leases was 6.8 years (7.5) for the management portfolio and 7.7 years (7.8) when the project portfolio is included. The public sector represents approximately 71 per cent of the total customer portfolio. The entire property portfolio consists of 93 properties with a market value of about 37.0 billion. 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 Cushman & Wakefield) 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 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 5.8 per cent to 5.5 per cent. 12 months rolling rent has increased from 1,773 to 1,944 per square meter whereas the market rent has increased from 1,772 to 1,968 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 | 626 807 | 98.1 | 6.3 | 24 084 | 38 423 | 1 384 | 2 208 | 5.2 | 1 428 | 2 278 |
| Trondheim | 9 | 113 458 | 97.9 | 5.9 | 2 511 | 22 130 | 178 | 1 567 | 6.4 | 171 | 1 508 |
| Sandvika | 9 | 91 340 | 90.4 | 10.6 | 2 252 | 24 654 | 131 | 1 438 | 5.3 | 128 | 1 397 |
| Stavanger | 5 | 72 680 | 97.1 | 9.6 | 2 008 | 27 633 | 136 | 1 865 | 6.3 | 123 | 1 698 |
| Drammen | 8 | 70 308 | 97.1 | 8.3 | 1 988 | 28 274 | 122 | 1 729 | 5.7 | 111 | 1 573 |
| Bergen | 5 | 48 679 | 99.3 | 4.9 | 1 230 | 25 258 | 74 | 1 527 | 5.4 | 89 | 1 819 |
| Kristiansand | 7 | 45 158 | 94.3 | 5.4 | 669 | 14 820 | 52 | 1 154 | 6.8 | 54 | 1 198 |
| Management portfolio |
84 | 1 068 430 | 97.5 | 6.8 | 34 742 | 32 517 | 2 077 | 1 944 | 5.5 | 2 103 | 1 968 |
| Project portfolio | 5 | 93 124 | 18.5 | 1 779 | 19 100 | ||||||
| Development sites | 4 | 101 558 | 0.5 | 466 | 4 591 | ||||||
| Property portfolio | 93 | 1 263 111 | 7.7 | 36 987 | 29 282 |
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 31.03 corresponds to 8.6 per cent of market rent.
The below table reconciles the individual balance sheet items to the property market value presented above.
| All figures in NOK millions | Q1-17 | Q1-16 | 2016 |
|---|---|---|---|
| Investment property | 36 327 | 29 070 | 35 629 |
| Investment properties held for sale | 675 | 148 | 168 |
| Properties and housing-units held for sale | 0 | 653 | 0 |
| Other | -15 | -9 | -13 |
| Property market value | 36 987 | 29 862 | 35 785 |
During the first quarter Entra signed new and renegotiated leases with an annual rent totalling 145 million (60,000 square metres) and received notices of termination on leases with an annual rent of 76 million (24,000 square metres). . Net letting was -34 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 339 million in the portfolio of investment properties in the quarter. In addition, Entra has invested 107 million through its non-consolidated jointly controlled entities (214 million on a 100 per cent basis).
The portfolio of ongoing project with a total investment exceeding 50 million is presented below. The below description includes projects in jointly controlled entities not consolidated in the financial accounts except projects in Oslo S Utvikling.
| 50 | Bergen | Aug-17 | 45 000 | 84 | 1 830 | 1 666 | 6.1 | |
|---|---|---|---|---|---|---|---|---|
| MediaCity Bergen | ||||||||
| Jointly controlled companies: | ||||||||
| Total Group | 81 500 | 3 050 | 1 497 | |||||
| Tullinkvartalet (UIO) | 100 | Oslo | Dec-19 | 21 000 | 92 | 1 489 | 552 | 5.5 |
| Brattørkaia 17 A | 100 | Trondheim | Mar-19 | 18 200 | 48 | 497 | 98 | 6.2 |
| Brattørkaia 16 | 100 | Trondheim | Jun-18 | 10 500 | 100 | 291 | 129 | 6.6 |
| Trondheimsporten | 100 | Trondheim | Nov-17 | 28 600 | 88 | 680 | 533 | 6.4 |
| Powerhouse Kjørbo, block 1 | 100 | Sandvika | Nov-17 | 3 200 | 100 | 93 | 48 | 6.4 |
| Powerhouse Kjørbo, block 3 | 100 | Sandvika | Jul-17 | 4 200 | 54 | 144 | 137 | 5.6 |
| Group: | ||||||||
| Ownership (%) |
Location | Expected completion |
Project area (sqm) |
Occupancy (%) |
Estimated total project cost* (NOKm) |
Of which accrued* (NOKm) |
Yield on cost** |
* 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)
In Tullinkvartalet Entra has ongoing construction of a new 21,000 square metres campus building for the Faculty of Law of University of Oslo. The property is 92 per cent let to the University on a 25-year lease. The new build project involves Entra's properties in Kristian Augusts gate 15, 19, and parts of 21, which to a large extent is being demolished and re-built. The final zoning plan was approved on 1 of February 2017 and the project will be finalised in the end of 2019. Currently ongoing activities are engineering, planning, demolishing and ground works. The new build project aims for a BREEAM Excellent classification.
On Brattørkaia 16, Entra is building a 10,500 square meter campus building for BI Norwegian Business School. The property is fully let to BI Norwegian Business School on a 20-year lease. The
project has high environmental ambitions and aims for a BREEAM Excellent classification. Construction has commenced and the project will be finalised in the summer 2018.
On Brattørkaia 17, Entra will build Powerhouse Brattørkaia, an energy positive and environment friendly office building of approximately 18,200 square metres, of which a 2,500 square metres parking basement. The property is 48 per cent pre-let. Powerhouse Brattørkaia will utilise sun and sea water for heating and cooling. The building will be covered by 3,000 square metres of solar panels and thus produce around 500,000 kWh of renewable energy annually. This is more than twice as much as the building consumes for heating, cooling, ventilation and lighting and means that the building has a positive energy
balance in its lifetime also when all the energy that goes into building processes, materials and finally demolition is included. The project is aiming for the environmental classification BREEAM Outstanding and Energy class A. Construction has commenced and the project will be finalised in the first quarter of 2019.
"Trondheimsporten" is a new-build project centrally located in Holtermanns veg 70 in Trondheim. When completed, the property will be a 15-floor office building of approximately 28,600 square metres. The property is 88 per cent pre-let to Trondheim municipality and the Norwegian Labour and Welfare Administration on 10-year contracts. 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 work on technical installations has commenced.
In Sandvika Entra is refurbishing the Block 3 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 square metres and is 54 per cent pre-let to Asplan Viak.
In Sandvika Entra is also refurbishing the Block 1 at Kjørbo into a new Powerhouse with a BREEAM Excellent classification. This block is 3,200 square meters and is 100 per cent pre-let to Norconsult.
Media City Bergen involves total renovation of approximately 35,000 square metres and an extension of approximately 10,000 square metres in Lars Hilles gate 30 in Bergen. 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. The largest media companies such as TV2, NRK, Bergensavisen, Bergens Tidende, the Media Faculty of Bergen University, and Vizrt have signed lease contracts. The property is 50 per cent owned by Entra through Entra OPF. The project will be completed in August 2017 and is 84 per cent prelet.
Youngskvartalet in Oslo involves both a new building and refurbishment of three existing buildings. The project consists of 9,400 square metres 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 finalised, Entra will deliver the project at cost, plus a project management fee.
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 its four core markets; Oslo, Bergen, Trondheim and Stavanger. Target areas include both 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 meets these acquisition criterias. At the same time, Entra actively divests smaller non-core properties. The acquisition and divestment strategy is flexible, allowing Entra to adapt to feedback from customers and market changes, and to respond to market opportunities as they arise.
| Transaction | Transaction | Closing | |||
|---|---|---|---|---|---|
| Purchased properties | Area | quarter | No of sqm | value | date |
| Kristian Augusts gate 13 | Oslo | Q4 2016 | 3 300 | 155 | 20.01.2017 |
| Skøyen portfolio (three properties) | Oslo | Q2 2016 | 61 000 | 2 529 | 01.09.2016 |
| Lars Hilles gate 25 | Bergen | Q2 2016 | 5 800 | 53 | 01.09.2016 |
| Sum | 70 100 | 2 737 | |||
| Transaction | Transaction | Closing | |||
| Sold properties | quarter | No of sqm | value | date | |
| Kristiansand portfolio | Kristiansand | Pending | 45 000 | 863 | Pending |
| Moloveien 10 | Bodø | Q4 2016 | 5 531 | 83 | 15.02.2017 |
| Kongensgate 85/Erling Skakkesgate 60 | Trondheim | Q4 2016 | 1 769 | 16 | 31.03.2017 |
| Lervigsveien 32/Tinngata 8 | Stavanger | Q4 2016 | 6 400 | 56 | 30.11.2016 |
| Kalfarveien 31 | Bergen | Q2 2016 | 8 440 | 85 | 01.11.2017 |
| 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 |
| Gullfaks, Hinna Park (forward sale) | Stavanger | Q3 2015 | 17 900 | 727 | 30.10.2016 |
| Sum | 107 294 | 2 166 |
Entra and Drammen Municipality own Papirbredden Eiendom AS. The company owns six office properties totalling around 59,000 sqm and a future development potential totalling around 60,000 sqm in Drammen.
Entra and Camar Eiendom own Hinna Park Eiendom AS. The company owns three office properties of around 30,000 sqm and development potential for two new office properties totalling around 29,000 sqm.
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.
Entra and Skanska Commercial Development own Sundtkvartalet Holding AS. The company owns a new-built office property of approximately 31,000 square meters in Sundtkvartalet in Oslo.
OSU is a property development company that is undertaking the development of parts of the city district Bjørvika in Oslo.
| Sum | Sum associated |
|||||||
|---|---|---|---|---|---|---|---|---|
| All figures in NOK millions | Papirbredden Eiendom AS |
Hinna Park Eiendom AS |
consolidated companies |
Entra OPF Utvikling AS |
Sundtkvartalet Holding AS |
Oslo S Utvikling AS |
Other | companies & JVs |
| Share of ownership (%) | 60 | 50 | 50 | 50 | 33 | |||
| Rental income | 25 | 17 | 42 | 5 | 8 | 25 | 1 | 38 |
| Net operating income | 24 | 15 | 39 | 4 | 7 | 25 | -2 | 34 |
| Net income | 15 | 5 | 20 | 3 | 2 | -3 | 0 | 2 |
| Changes in value of investment properties | 57 | -23 | 34 | 118 | 199 | 0 | 0 | 317 |
| Changes in value of financial instruments | 2 | 1 | 2 | 0 | 0 | 10 | 0 | 10 |
| Profit before tax | 74 | -17 | 56 | 121 | 201 | 7 | 0 | 329 |
| Tax | -18 | 5 | -13 | -29 | -48 | -1 | 0 | -79 |
| Profit for period/year | 56 | -12 | 44 | 92 | 153 | 6 | 0 | 251 |
| Non-controlling interests | 22 | -6 | 16 | |||||
| Entras share of profit | 46 | 77 | 2 | 0 | 124 | |||
| Book value | 949 | 268 | 537 | 9 | 1 764 | |||
| Market value properties | 1 733 | 1 026 | 2 759 | 2 042 | 1 534 | 5 027 | 8 603 | |
| Entras share: | ||||||||
| Market value properties | 1 040 | 513 | 1 553 | 1 021 | 767 | 1 676 | 3 464 | |
| EPRA NAV | 549 | 113 | 662 | 987 | 319 | 1 213 | 9 | 2 528 |
| EPRA NNNAV | 508 | 94 | 602 | 969 | 304 | 1 131 | 9 | 2 414 |
| EPRA Earnings | 7 | 2 | 9 | 2 | 1 | -4 | 0 | -2 |
In 2016 the volume of transactions in the Norwegian market totalled around NOK 70 billion, which is high in a normalised perspective but lower than the record year 2015. There are relatively few properties for sale and demand from both national and international investors remains strong. The yield gap remains attractive despite the recent increase in interest rates and the Norwegian economy has proven resilient through the recent period of low oil prices. The strong residential market also results in high demand for office properties that can be converted to residential use, which has brought a new set of investors into the office transaction market. The prime yield in Oslo has decreased to around 3.8 per cent and the overall high level of demand for Norwegian real estate has led to a contraction in yield levels in all cities and property segments.
Source: Entra Consensus report
As of year-end 2016 the Oslo office vacancy was about 7.8 per cent, according to Entra´s consensus report. The vacancy is expected to drop to around 7 per cent by the end of the year due to continuous office-to-residential conversion, low construction activity in the office market in Oslo, and a slight increase in employment.
The broad uplift in rent levels seen in the last quarter of 2016 continued in 2017, combined with a high volume of signed lease contracts. Rent levels are expected to continue to grow due to a tight market for supply of office space.
In Bergen, the office vacancy has levelled out at about 10 per cent. The office vacancy in Bergen is mainly related to properties situated around the oil and gas intensive office areas at Kokstad, Sandsli and Flesland. Rents in the city centre of Bergen has increased due to low supply of modern, centrally located office premises.
In Stavanger, overall office vacancy has continued to rise to around 11 per cent at the end of the year. There is still a downward pressure on rents in "oil and gas intensive" areas like Forus. In the Stavanger city centre, the vacancy is at about 6 per cent and rent levels are more stable. The construction activity is low.
The overall rent level in Trondheim has remained unchanged throughout 2016 and the vacancy level is currently around 10 per cent. There is a downward pressure on rents, especially in the fringe areas due to higher vacancy. There has been limited new office space coming into the market, however the volume of new office space will increase next year and the office vacancy is thus expected to rise somewhat.
| 2013 | 2014 | 2015 | 2016 | 2017e | 2018e | |
|---|---|---|---|---|---|---|
| Vacancy Oslo and Bærum (%) | 7.4 | 7.8 | 8.4 | 7.8 | 7.0 | 6.4 |
| Rent per sqm, high standard Oslo office | 2 907 | 3 025 | 2 935 | 2 982 | 3 169 | 3 309 |
| Prime yield (%) | 5.2 | 4.7 | 4.1 | 3.8 | 3.9 | 4.0 |
Source: Entra Consensus report
At 31.03.17 the Group had 152 employees, reduced from 166 at year-end 2016 as a result of the establishment of a jointly controlled entity Hinna Park Facility Management AS During the quarter there were zero 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 2,6 at the end of the quarter vs 3.6 at the end of the fourth quarter 2016.
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. 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.
As a result of the final settlement agreement regarding the sale of Gullfaks in Stavanger, Entra will recognise approximately 18 million as reduction of other costs in Q2 2017.
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 18 April 2017, Entra had 5,523 shareholders. Norwegian investors held 57 per cent of the share capital. The 10 largest shareholders as registered in VPS on 18 April 2017 were:
| Shareholder | % holding |
|---|---|
| Norwegian Ministry of Trade, Industry and Fisheries | 33.4 |
| Folketrygdfondet | 7.3 |
| Geveran Trading | 7.1 |
| State Street Bank (Nominee) | 3.0 |
| The Bank of New York (Nominee) | 2.2 |
| Danske Invest Norske | 2.2 |
| The Bank of New York (Nominee) | 1.8 |
| J.P. Morgan Bank (Nominee) | 1.2 |
| State Street Bank (Nominee) | 1.2 |
| Danske Invest Norske | 1.1 |
| SUM 10 LARGEST SHAREHOLDERS | 60.5 |
The Norwegian economy has been influenced by a weaker macroeconomic development and general uncertainty but there has been positive development in certain key macro indicators over several quarters.
The downturn in the oil sector and related industries has turned into a moderate recovery. The downturn has primarily had a negative impact in the southern and western part of Norway, and sub markets with a high level of oil exposure have experienced increasing vacancies and pressure on rents.
Entra is in a good position having low presence in the geographical areas hit by the downturn, long lease contracts with solid tenants and a low exposure towards the oil sector.
Oslo constitutes around 70 per cent of Entra's revenues. Here, we expect vacancy levels 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. Decreasing vacancy is thus expected to lead to increasing market rent levels in Oslo going forward.
Modern offices located near public transportation are attractive and obtain solid rents compared to premises located in less central areas.
Market interest rates for longer dated maturities have stabilised following the increasing trend seen in the recent months. There is risk for a further increase from the current historically low levels. However, Entra with its strong balance sheet, predictable cash flow and well-balanced interest rate hedge position is in a 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, value enhancing development project and a positive rental market outlook should provide a continued positive portfolio 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, 26 April 2017
The Board of Entra ASA
| All figures in NOK millions | Q1-17 | Q1-16 | 2016 |
|---|---|---|---|
| Rental income | 525 | 454 | 1 899 |
| Repairs & maintenance | -6 | -2 | -50 |
| Operating costs | -30 | -22 | -109 |
| Net operating income | 489 | 429 | 1 740 |
| Other revenue | 61 | 58 | 950 |
| Other costs | -59 | -54 | -927 |
| Administrative costs | -43 | -44 | -152 |
| Share of profit from associates and JVs | 124 | 8 | 150 |
| Net realised financials | -141 | -133 | -572 |
| Net income | 432 | 265 | 1 190 |
| - of which net income from property management | 311 | 278 | 1 070 |
| Changes in value of investment properties | 870 | 182 | 1 991 |
| Changes in value of financial instruments | 0 | -162 | 125 |
| Profit before tax | 1 302 | 284 | 3 306 |
| Tax payable | 0 | 0 | -4 |
| Change in deferred tax | |||
| -258 | -63 | -580 | |
| Profit for period/year | 1 044 | 221 | 2 722 |
| Actuarial gains and losses | 0 | 0 | -23 |
| Change in deferred tax on comprehensive income | 0 | 0 | 6 |
| Total comprehensive income for the period/year | 1 044 | 221 | 2 705 |
| Profit attributable to: | |||
| Equity holders of the Company | 1 028 | 223 | 2 619 |
| Non-controlling interest | 16 | -2 | 103 |
| Total comprehensive income attributable to: | |||
| Equity holders of the Company Non-controlling interest |
1 028 16 |
223 -2 |
2 602 103 |
| All figures in NOK millions | 31.03.2017 | 31.03.2016 | 31.12.2016 |
|---|---|---|---|
| Intangible assets | 124 | 161 | 124 |
| Investment property | 36 327 | 29 070 | 35 629 |
| Other operating assets | 21 | 28 | 26 |
| Investments in associates and JVs | 1 764 | 2 877 | 1 561 |
| Financial derivatives | 457 | 634 | 472 |
| Long-term receivables | 169 | 66 | 163 |
| Total non-current assets | 38 862 | 32 835 | 37 976 |
| Property and housing-units for sale | 0 | 645 | 0 |
| Investment property held for sale | 675 | 148 | 168 |
| Trade receivables | 46 | 61 | 27 |
| Other receivables | 531 | 238 | 476 |
| Cash and bank deposits | 381 | 136 | 243 |
| Total current assets | 1 633 | 1 227 | 914 |
| Total assets | 40 495 | 34 063 | 38 890 |
| Shareholders equity | 15 760 | 13 218 | 14 732 |
| Non-controlling interests | 403 | 357 | 392 |
| Total equity | 16 163 | 13 575 | 15 124 |
| Interest-bearing debt | 14 617 | 11 973 | 14 734 |
| Deferred tax liability | 4 113 | 3 380 | 3 855 |
| Financial derivatives | 850 | 1 295 | 894 |
| Other non-current liabilities | 350 | 230 | 358 |
| Total non-current liabilities | 19 930 | 16 878 | 19 841 |
| Interest-bearing debt | 3 826 | 3 123 | 3 379 |
| Trade payables | 257 | 221 | 290 |
| Other current liabilities | 319 | 266 | 257 |
| Total current liabilities | 4 402 | 3 609 | 3 926 |
| Total liabilities | 24 332 | 20 488 | 23 766 |
| Total equity and liabilities | 40 495 | 34 063 | 38 890 |
| All figures in NOK millions | Share capital |
Other paid in capital |
Retained earnings |
Non controlling interest |
Total equity |
|---|---|---|---|---|---|
| Equity 31.12.2015 | 184 | 3 556 | 9 255 | 359 | 13 354 |
| Profit for period | 2 619 | 103 | 2 722 | ||
| Other comprehensive income | -17 | -17 | |||
| Dividend | -864 | -70 | -934 | ||
| Net equity effect of employee share saving scheme | -1 | -1 | |||
| Equity 31.12.2016 | 184 | 3 556 | 10 992 | 392 | 15 124 |
| Profit for period | 1 028 | 16 | 1 044 | ||
| Dividend | -5 | -5 | |||
| Equity 31.03.2017 | 184 | 3 556 | 12 020 | 403 | 16 163 |
| All figures in NOK millions | Q1-17 | Q1-16 | 2016 |
|---|---|---|---|
| Profit before tax | 1 302 | 284 | 3 306 |
| Net expensed interest and fees on loans | 142 | 132 | 589 |
| Net interest and fees paid on loans | -134 | -126 | -520 |
| Share of profit from associates and jointly controlled entities | -124 | -8 | -150 |
| Depreciation and amortisation | 1 | 3 | 46 |
| Changes in value of investment properties | -870 | -182 | -1 991 |
| Changes in value of financial instruments | 0 | 162 | -125 |
| Change in working capital | -66 | 11 | -59 |
| Net cash flow from operating activities | 250 | 277 | 1 097 |
| Proceeds from property transactions | 151 | 162 | 1 021 |
| Purchase of investment properties | -156 | 0 | -2 536 |
| Investment in and upgrades of investment properties | -297 | -132 | -1 001 |
| Investment in property and housing-units for sale | -39 | -100 | -233 |
| Purchase of intangible and other operating assets | 0 | -2 | -15 |
| Net payment financial assets | 0 | 5 | -5 |
| Net payment of loans to associates and JVs | -8 | 0 | -1 |
| Net payments in associates and JVs | -78 | -80 | -253 |
| Dividends from associates and JVs | 0 | 0 | 51 |
| Net cash flow from investment activities | -427 | -147 | -2 972 |
| Proceeds interest-bearing debt | 4 020 | 3 517 | 17 536 |
| Repayment interest-bearing debt | -3 706 | -3 723 | -14 695 |
| Proceeds from/repayment of equity | 0 | 0 | -1 |
| Dividends paid | 0 | 0 | -934 |
| Net cash flow from financing activities | 314 | -206 | 1 906 |
| Change in cash and cash equivalents | 138 | -76 | 31 |
| Cash and cash equivalents at beginning of period | 243 | 212 | 212 |
| Cash and cash equivalents at end of period | 381 | 136 | 243 |
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 2016.
The financial reporting covers Entra ASA, subsidiaries, associated companies and jointly controlled entities. The interim financial statements have not been audited.
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 noneconomical 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 | 626 807 | 98.1 | 6.3 | 24 084 | 38 423 | 1 384 | 2 208 | 5.2 | 1 428 | 2 278 |
| Trondheim | 9 | 113 458 | 97.9 | 5.9 | 2 511 | 22 130 | 178 | 1 567 | 6.4 | 171 | 1 508 |
| Sandvika | 9 | 91 340 | 90.4 | 10.6 | 2 252 | 24 654 | 131 | 1 438 | 5.3 | 128 | 1 397 |
| Stavanger | 5 | 72 680 | 97.1 | 9.6 | 2 008 | 27 633 | 136 | 1 865 | 6.3 | 123 | 1 698 |
| Drammen | 8 | 70 308 | 97.1 | 8.3 | 1 988 | 28 274 | 122 | 1 729 | 5.7 | 111 | 1 573 |
| Bergen | 5 | 48 679 | 99.3 | 4.9 | 1 230 | 25 258 | 74 | 1 527 | 5.4 | 89 | 1 819 |
| Kristiansand | 7 | 45 158 | 94.3 | 5.4 | 669 | 14 820 | 52 | 1 154 | 6.8 | 54 | 1 198 |
| Management portfolio |
84 | 1 068 430 | 97.5 | 6.8 | 34 742 | 32 517 | 2 077 | 1 944 | 5.5 | 2 103 | 1 968 |
| Project portfolio | 5 | 93 124 | 18.5 | 1 779 | 19 100 | ||||||
| Development sites | 4 | 101 558 | 0.5 | 466 | 4 591 | ||||||
| Property portfolio | 93 | 1 263 111 | 7.7 | 36 987 | 29 282 |
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 31.03 corresponds to 8.6 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 | 38 | 518 625 | 94.8 | 6.9 | 17 874 | 34 465 | 1 079 | 2 081 | 5.6 | 1 080 | 2 082 |
| Trondheim | 9 | 117 187 | 98.2 | 6.5 | 2 435 | 20 780 | 175 | 1 490 | 6.5 | 165 | 1 410 |
| Sandvika | 10 | 100 047 | 90.6 | 10.5 | 2 193 | 21 920 | 127 | 1 268 | 5.3 | 134 | 1 335 |
| Stavanger | 6 | 79 194 | 93.7 | 10.0 | 2 057 | 25 976 | 136 | 1 718 | 6.1 | 135 | 1 711 |
| Drammen | 8 | 71 506 | 92.3 | 8.8 | 1 713 | 23 952 | 109 | 1 531 | 6.0 | 105 | 1 470 |
| Bergen | 6 | 57 119 | 98.8 | 5.5 | 1 217 | 21 298 | 84 | 1 477 | 6.2 | 92 | 1 617 |
| Kristiansand | 7 | 45 158 | 95.6 | 8.6 | 616 | 13 645 | 53 | 1 171 | 7.6 | 49 | 1 086 |
| Other | 2 | 9 823 | 84.6 | 4.2 | 74 | 7 487 | 7 | 752 | 8.0 | 9 | 906 |
| Management portfolio |
86 | 998 659 | 94.7 | 7.5 | 28 179 | 28 216 | 1 771 | 1 773 | 5.8 | 1 770 | 1 772 |
| Project portfolio | 6 | 104 834 | 16.4 | 1 277 | 12 183 | ||||||
| Development sites | 4 | 120 911 | 0.9 | 407 | 3 364 | ||||||
| Property portfolio | 96 | 1 224 404 | 7.8 | 29 862 | 24 389 |
Ringstabekk housing project is included in market value of management portfolio at cost price of 11 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 31.03 corresponds to 8.2 per cent of market rent.
| All figures in NOK millions | Q1-17 | Q1-16 | 2016 |
|---|---|---|---|
| Closing balance previous period | 35 798 | 28 989 | 28 989 |
| Purchase of investment property | 155 | 0 | 4 183 |
| Investment in the property portfolio | 339 | 208 | 1 004 |
| Capitalised borrowing costs | 5 | 1 | 11 |
| Sale of investment property | -168 | -161 | -379 |
| Reclassified from properties for use of the group | 4 | 0 | 0 |
| Changes in value of operational lease | 11 | 17 | -28 |
| Changes in value of investment properties | 859 | 165 | 2 018 |
| Closing balance | 37 002 | 29 218 | 35 798 |
| Investment property held for sale | 675 | 148 | 168 |
| Investment property | 36 327 | 29 070 | 35 629 |
Investment properties held for sale include the Kristiansand properties Kongsgård Allé 20, Tordenskioldsgate 65, Tordenskioldsgate 67, Lømslandsvei 6, Lømslandsvei 24, St.Hansgate 1 and Vestre Strandgata 21where closing is expected to take place during the second quarter of 2017.
During the first quarter of 2017 Molovegen 10 in Bodø was sold in January 2017 with closing in February 2017, the property Kalfarveien 31 in Bergen had closing in February 2017 and the property Erling Skakkesgate 60/Kongensgate 85 in Trondheim had closing 31 March 2017.
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 688 million (668 million) as at the end of the first quarter of 2017. 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 with Norwegian Datasenter Group AS/ Greenfield Property AS.
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 was appealed by the counterparty and the hearing of the dispute took place in February 2017. Entra prevailed and the counterparty has appealed to the Supreme Court.
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 2016 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 37.002 million are classified at level 3.
| All figures in NOK millions | 31.03.2017 | 31.03.2016 | 31.12.2016 |
|---|---|---|---|
| Assets measured at fair value: | |||
| Assets measured at fair value with change over the result | |||
| - Investment property | 36 327 | 29 070 | 35 629 |
| - Investment property held for sale | 675 | 148 | 168 |
| - Derivatives | 457 | 634 | 472 |
| Financial assets held for sale | |||
| - Equity instruments | 1 | 1 | 1 |
| Total | 37 459 | 29 853 | 36 270 |
| Liabilities measured at fair value: | |||
| Financial liabilities measured at fair value with change over the result | |||
| - Derivatives | 850 | 1 295 | 894 |
| - Bonds | 6 031 | 4 146 | 5 615 |
| - Commercial paper | 2 200 | 1 900 | 1 700 |
Total 9 081 7 341 8 209
In January 2017 the Group signed an agreement regarding sale of a property portfolio in Kristiansand for a total of 863 million which includes completion and related construction costs regarding the construction of a new school building in Kongsgård Allé 20 where settlement will take place when completed. The corresponding total property value is 675 million. The buyer is Samhällsbyggnadsbolaget i Norden AB (publ) and the transaction is subject to the buyer obtaining satisfactory debt financing.
Closing and settlement is postponed and is now expected to take place during the second quarter of 2017 for the portfolio, except for the 2,250 sqm new school building under construction in Kongsgård Allé 20 where settlement is expected to take place in June 2018.
Key figures for the property portfolio in total are listed below:
| All figures in NOK millions | 2016 | 2015 |
|---|---|---|
| Rental income Repairs & maintenance |
50 -4 |
47 -3 |
| Operating costs | -2 | -2 |
| Net operating income | 44 | 43 |
| Book value as of 31.12. | 675 | 613 |
| All figures in NOK millions | Q1-17 | Q1-16 | 2016 |
|---|---|---|---|
| Net income | 432 | 265 | 1 190 |
| Depreciation | 1 | 3 | 46 |
| Results from associates and joint ventures | -124 | -8 | -150 |
| Net realised financials | 141 | 133 | 572 |
| EBITDA adjusted | 450 | 393 | 1 658 |
| Share of EBITDA Entra OPF Utvikling | 2 | 1 | 4 |
| EBITDA adjusted for share of Entra OPF Utvikling | 452 | 394 | 1 663 |
| Interest cost | 150 | 136 | 567 |
| Other finance expense | 5 | 4 | 41 |
| Applicable net interest cost | 155 | 140 | 608 |
| Interest Coverage Ratio (ICR) | |||
| 2.9 | 2.8 | 2.7 |
The following performance indicators have been prepared in accordance with best practices as defined by EPRA (European Public Real Estate Association) in its Best Practices Recommendations guide.
| Summary table EPRA performance measures | Unit | Q1 17 / 31.03.2017 |
2016 / 31.12.2016 |
|
|---|---|---|---|---|
| A | EPRA earnings per share (EPS) | NOK | 1.2 | 4.3 |
| B | EPRA NAV per share | NOK | 110 | 101 |
| EPRA triple net asset value per share (NNNAV) | NOK | 101 | 93 | |
| C | EPRA net initial yield | % | 5.4 | 5.6 |
| EPRA, "topped-up" net initial yield | % | 5.4 | 5.6 | |
| D | EPRA vacancy rate | % | 2.6 | 3.8 |
| E | EPRA cost ratio (including direct vacancy costs | % | 14.1 | 15.9 |
| EPRA cost ratio (excluding direct vacancy costs) | % | 13.4 | 14.0 | |
The details for the calculation of the key figures are shown in the following tables:
EPRA earnings is a measure of the underlying development in the property portfolio and is calculated as 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 figures in NOK millions | Q1-17 | Q1-16 | 2016 |
|---|---|---|---|
| Profit for period/year - Earnings per IFRS income statement | 1 044 | 221 | 2 722 |
| Add: | |||
| Changes in value of investment properties | -870 | -182 | -1 991 |
| Tax on changes in value of investment properties* | 209 | 45 | 498 |
| Reversal of deferred tax arising from sales of properties (tax excempted) | -23 | -7 | -14 |
| Changes in value of financial instruments | 0 | 162 | -125 |
| Tax on changes in value of financial instruments* | 0 | -41 | 31 |
| Profit or losses on disposal of inventory in Oslo S Utvikling | -8 | -2 | -60 |
| Share of profit jointly controlled entities – fair value adjustments | -159 | 7 | -110 |
| Reversal of deferred tax EPRA adjustments jointly controlled entities | 40 | -1 | 18 |
| Net income non-controlling interests of subsidiaries | -9 | -9 | -37 |
| Reversal of tax non-controlling interests of subsidiaries | 2 | 2 | 9 |
| Change in tax rate** | 0 | 0 | -161 |
| Tax payable | 0 | 0 | 2 |
| EPRA earnings | 228 | 197 | 784 |
| Reversal of tax adjustment above | -228 | 1 | -384 |
| Reversal of change in deferred tax from income statement | 258 | 63 | 580 |
| Reversal of tax payable from income statement | 0 | 0 | 4 |
| Reversal of tax JVs | 39 | 3 | 16 |
| EPRA earnings before tax | 297 | 263 | 1 000 |
* 24 per cent from Q1 2017, 25 per cent previous periods
** From 25 per cent to 24 per cent for 2016 figures
The objective with EPRA NAV is to demonstrate the fair value of net assets given a long-term investment horizon. EPRA NAV is calculated as net asset value adjusted to include market value of all properties in the portfolio and 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 NNNAV is to report the fair value of net assets in the Group on the basis that these are immediately realised. EPRA NNNAV is EPRA NAV adjusted to reflect the fair value of debt and derivatives and in order to include deferred tax on value changes.
| All figures in NOK millions | Q1-17 | Q1-16 | 2016 |
|---|---|---|---|
| Total equity | 16 163 | 13 575 | 15 124 |
| Less: Non-controlling interests | 403 | 357 | 392 |
| NAV per financial statement | 15 760 | 13 218 | 14 732 |
| Add: Adjustment to property portfolio | 1 | 9 | 1 |
| Add: Revaluation of investments made in the JV | 764 | 125 | 368 |
| Add: Net market value on financial derivatives | 394 | 661 | 421 |
| Add: Deferred tax arising on revaluation moments | 3 316 | 2 578 | 3 091 |
| EPRA NAV | 20 234 | 16 591 | 18 613 |
| Market value on property portfolio | 36 987 | 29 862 | 35 785 |
| Tax value on property portfolio | 15 139 | 12 277 | 15 007 |
| Basis for calculation of tax on gain on sale | 21 848 | 17 586 | 20 778 |
| Less: Market value of tax on gain on sale (5% tax rate) | 1 092 | 879 | 1 039 |
| Net market value on financial derivatives | 394 | 661 | 421 |
| Tax expense on realised financial derivatives* | 94 | 165 | 101 |
| Less: Net result from realisation of financial derivatives | 299 | 496 | 320 |
| Book value of interest bearing debt | 18 443 | 15 096 | 18 113 |
| Nominal value of interest bearing debt | 18 012 | 14 650 | 17 696 |
| Basis for calculation of tax on realisation of interest-bearing debt | 431 | 445 | 416 |
| Less: Market value of tax on realisation* | 103 | 111 | 100 |
| Less: MV of tax on gain on sale (5% tax rate) & realisation of financial derivatives in JVs | 115 | ||
| EPRA NNNAV | 18 625 | 15 105 | 17 154 |
* 24 per cent from 31.12.2016, 25 per cent from 31.12.2015
EPRA Net initial yield measures the annualised rental income based on the cash rents passing at the balance sheet date, less nonrecoverable property operating expenses, divided by the market value of the property, increased with (estimated) purchasers' costs.
EPRA "topped-up" net initial yield incorporates an adjustment to the EPRA NIY in respect of the expiration of rent-free periods (or other unexpired lease incentives such as discounted rent periods and step rents).
| Trond | Stavange | Dramme | Kristian | |||||
|---|---|---|---|---|---|---|---|---|
| All figures in NOK millions | Oslo | heim | Sandvika | r | n | Bergen | sand | Total |
| Investment property - wholly owned | 24 878 | 3 733 | 2 403 | 1 155 | 255 | 1 291 | 685 | 34 400 |
| Investment property - share of JVs/Funds |
767 | 0 | 0 | 513 | 1 040 | 1 021 | 0 | 3 340 |
| Total property portfolio | 25 645 | 3 733 | 2 403 | 1 668 | 1 295 | 2 312 | 685 | 37 741 |
| Less projects and land and developments |
-794 | -1 049 | -152 | -86 | 0 | -949 | -15 | -3 045 |
| Completed management portfolio | 24 851 | 2 683 | 2 252 | 1 582 | 1 295 | 1 364 | 669 | 34 695 |
| Allowance for estimated purchasers` cost |
52 | 15 | 10 | 4 | 5 | 7 | 5 | 97 |
| Gross up completed management portfolio valuation |
24 903 | 2 698 | 2 261 | 1 586 | 1 300 | 1 370 | 674 | 34 792 |
| 12 months rolling rent | 1 415 | 196 | 131 | 104 | 81 | 85 | 52 | 2 064 |
| Estimated ownership cost | 121 | 20 | 11 | 8 | 5 | 9 | 7 | 181 |
| Annualised net rents | 1 293 | 175 | 120 | 96 | 76 | 77 | 45 | 1 883 |
| Add: Notial rent expiration of rent free periods or other lease incentives |
1 | 0 | 0 | 0 | 0 | 0 | 0 | 1 |
| Topped up net annualised net rents | 1 294 | 175 | 120 | 96 | 76 | 77 | 45 | 1 884 |
| EPRA NIY (net initial yield) | 5.2% | 6.5% | 5.3% | 6.0% | 5.8% | 5.6% | 6.7% | 5.4% |
| EPRA "topped-up" NIY (net initial yield) |
5.2% | 6.5% | 5.3% | 6.0% | 5.8% | 5.6% | 6.7% | 5.4% |
Estimated Market Rental Value (ERV) of vacant space divided by ERV of the whole portfolio.
| All figures in NOK millions | Oslo | Trondheim | Sandvika | Stavanger | Drammen | Bergen | Kristiansand | Total |
|---|---|---|---|---|---|---|---|---|
| Market rent vacant areas | 29 | 4 | 12 | 3 | 2 | 1 | 3 | 54 |
| Total market rent | 1 467 | 189 | 128 | 93 | 73 | 100 | 54 | 2 104 |
| Vacancy | 2.0% | 2.2% | 9.6% | 3.0% | 3.1% | 0.6% | 5.7% | 2.6% |
Administrative & operating costs (including & excluding costs of direct vacancy) divided by gross rental income.
| All figures in NOK millions | Q1-17 | Q1-16 | 2016 |
|---|---|---|---|
| Maintenance | -6 | -2 | -50 |
| Total operating costs | -30 | -22 | -109 |
| Administrative costs | -43 | -44 | -152 |
| Share of joint ventures expences | -2 | -2 | -5 |
| Less: Ground rent cost | 5 | 3 | 12 |
| EPRA Cost (including direct vacancy cost) | -75 | -67 | -304 |
| Direct vacancy cost | -4 | -10 | -38 |
| EPRA Cost (excluding direct vacancy cost) | -71 | -57 | -267 |
| Gross rental income less ground rent | 525 | 454 | 1 899 |
| Share of jount ventures and fund (GRI) | 6 | 2 | 10 |
| Total gross rental income less ground rent | 532 | 456 | 1 909 |
| Epra cost ratio (inkluding direct vacancy cost) | 14.1% | 14.7% | 15.9% |
| Epra cost ratio (excluding direct vacancy cost) | 13.4% | 12.6% | 14.0% |
For further information about EPRA, go to www.epra.com.
Market value of portfolio
Net Income from property
management
Net letting
Arve Regland CEO Phone: + 47 47907700 [email protected]
Anders Olstad CFO Phone: + 47 90022559 [email protected]
Tone K. Omsted Head of IR Phone: + 47 98228510 [email protected]
Entra ASA Post box 52 Økern 0508 Oslo, Norway
Phone: + 47 21605100 [email protected]
| 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, Ø><kern 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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