ENTRA.OLENTRA.OLOSL
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Sonja Horn: Welcome to Entra's fourth quarter presentation brought to you here from Oslo. Let me start by enlighting you on what you can see on this picture. This is Christian Krohgs gate 2 in Oslo, our planned redevelopment project, which we, in the quarter announced that we have entered into a partnership with Skanska to develop. So moving on to the highlights. Rental income of NOK 787 million in the quarter. That is NOK 20 million up compared to same quarter last year, meaning also that the effects from previous divestments have been offset by an increase through projects feeding into the management portfolio. Net income from property management of NOK 425 million in the quarter, that is up with NOK 108 million compared to same quarter last year, mainly explained by the completion and divestment of our project in Trondheim. The net value changes in the quarter were NOK 56 million. And in that, we have also included the positive value uplifts on the investment properties of NOK 111 million. Profit before tax of NOK 476 million in the quarter, and our EPRA NRV is up with NOK 2 per share to NOK 169 in the fourth quarter. We've had a good quarter in respect of operations with a positive net letting of NOK 4 million, and we have also completed 3 projects this quarter, one new build project in Trondheim, which also has been forward sale. So upon closing of that transaction, we have taken a gain of NOK 101 million in the fourth quarter. And our Board has decided to propose a dividend of NOK 1.10 per share for the second half of 2025, and this will be then decided at the Annual General Assembly on April 21. In addition to that, the Board has also decided to initiate a share buyback program of up to 0.5% of the company's shares based on the gains realized on the Trondheim transaction. Moving on to operations. We have, as I said, had a good quarter in respect of letting. Pleased to see that gross letting came in at NOK 183 million in the quarter. And if we look at the year as a whole, it's also been an active letting year where we signed a total of NOK 555 million. So right up there with historic best levels. If you look at our terminated contracts, NOK 80 million in the quarter. Out of that, approximately 57% is related to contracts which have been resigned in the Entra portfolio and the net letting then of NOK 4 million this quarter. A few comments on the largest contracts you can see at the bottom of the page. We were pleased to see that we prolonged and renegotiated with the Police, getting a good uptick on rent and signing 9.5 years new lease there. We will do some refurbishments for the Police here. And upon completion of that, we will prepare this asset for sale seeing that it's in a nonstrategic area for us. In Christian Krohgs gate 2, Skanska has signed 7,500 square meters. I'll get back to that shortly. In Kaigaten 9, Tide has signed 2,000 square meters, and that's also a project which we now will be preparing to start a refurbishment of this building, which is located right next to the train station in Bergen. Our occupancy is down with 40 basis points in the quarter to 93.8%. And as I have commented on in previous quarters, we expect to see more fluctuations in our occupancy ratio going forward, explained by a mix of factors. Firstly, the terminations and negative net letting we've had in the past quarters will potentially affect the occupancy going forward if we do have not let those vacated -- terminated space before the new leases -- sorry. This may translate into increased vacancy if we do not sign new leases on this space before the existing tenants move out. This is, however, fully reflected in our rental income bridge. If we take a look at also the timing of new projects will affect the vacancy and also the completed projects returning back into the management portfolio with some remaining vacant space will typically also affect the occupancy. So this quarter, the increase in vacancy is explained by the fact that the Brynsengfaret 6, one of our projects is feeding back into the management portfolio with an occupancy ratio of 83%. So if we move on to the projects which were completed in the quarter, Brynsengfaret 6, we had a refurbishment project here of 35,000 square meters. This has been completed in line with expectations, leaving us with a yield on cost of 5.8% and the building has now reached an energy class of C in line with the EU taxonomy. In Sandvika, we have a small project, 3,400 square meters, which is a courthouse building let to on a 20-year lease to the courthouse administration. This has been completed with some increase on costs, leaving us with a yield on cost of 4.6% versus the initiated reporting of 5.3%. And finally, in Trondheim, the new build project, which we completed is also part of a larger project totaling 48,000, which has been realized in 3 phases over the last 6 years. So when concluding this project, we have built 2 sections here, the new regional office for the Norwegian Broadcasting Corporation and one section of office. Both have been sold to the 2 buyers, the Norwegian Broadcasting Company and the existing previous buyer of the Trondheim portfolio. The total project cost here is NOK 611 million. That is NOK 73 million lower than what we initially started reporting on. And this is reflecting several factors. Firstly, we have managed to materialize some learning effects compared to the second phase, which was done with the same contractor and also the same team. We did a very favorable timing on that contracting. And also, we have transferred some of the lease-related risk and cost to the buyers as part of the forward sale. The transaction value of NOK 845 million includes also a tenant-specific outfitting of NOK 77 million for the Norwegian Broadcasting Company, which was settled as part of the transaction. And the return on investment on the project here is 25%. So this also is from a sustainability project perspective, quite an impressive project right up there amongst the top buildings in Norway, which also is part of the reason why we managed to do a decent or very good, I would say, transaction pricing on this building. If we move -- look at the completion of the entire Holtermanns project, I would say that it is a very good example on how we manage to combine high-quality development, disciplined risk management and transactions and creating good value. If you took a look at the ongoing development portfolio, we only have 2 projects on this list now. Both of them are progressing according to plan with the remaining CapEx of around NOK 270 million. And in Nonnesetergaten 4 in Bergen, we have increased the occupancy from 83% to 91% in the quarter. The cost is up slightly with NOK 5 million, but that is also financed through tenant investments. And the Drammensveien 134 project at Skoyen, also here, we've seen that up slightly in the quarter. We continue to have a disciplined approach to investment, prioritizing CapEx to solving the letting activity on vacant space. And as already mentioned, we will now prepare to start the project in Kaigaten 9 in Bergen and start reporting on that from the second quarter. That building is located right next to Nonnesetergaten on this list, meaning that we also expect to benefit a bit from the lease activity or letting activity and lease pipeline we already have on Nonnesetergaten 4. We also announced that we did a transaction in the fourth quarter with Skanska, where we sold 50% of the share in our building in Christian Krohgs gate 2 as part of a larger JV structure established for the redevelopment of this asset. This asset is located only 3 minutes walk from the central station, which you can see is around the high-rise buildings in the background there. And the transaction was based on a gross property value of NOK 550 million, which was 2.7% above our Q3 book values. And as part of the transaction, Skanska has also signed a lease contract for 7,500 square meters in 10 years in the new project. And they have also prolonged their existing lease with us in their current location at Sundtkvartalet, which is located, you can see on the map, the top right corner of this picture. That was a project which was materialized in the same JV structure with Skanska almost 10 years ago. And in addition to that, Skanska will act as a turnkey contractor for the construction of this project. And we clearly see that this partnership provides a very capital-efficient way for us to start the redevelopment of this project, which also will benefit this very strategic area for Entra, enhancing the qualities of the neighboring surroundings. The transaction closed in the first quarter and the project start is planned for the second quarter this year with the completion in the end of 2029. So that leaves us also with 4 years to solve the vacant -- remaining vacant space, seeing that we start the project with a pre-let ratio of 35%. I would also like to take the opportunity to update you a bit on the ongoing transformation on the area around the Oslo Central Station. Entra has approximately 190,000 square meters in their management portfolio in the area surrounding the Central Station. And this part of the city is going through a transformation. This is the most central communication hub in Norway. And I remember when I came into Entra more than 10 years ago, we started setting targets that we would push rent levels about NOK 3,000 per square meters in this high-rise building, where you can see that the current top rent is now around NOK 5,000 per square meter, which means that we, in the past 10 years, already have seen a 60% increase in rents in this area. Now on the photo on the right side here, you can see that the CBD East, which has been developed over the last 20 years in Oslo. In this area, top rents are now at NOK 6,500 per square meters. While on the north side of the tracks, rents are between -- top rents between NOK 4,000 and NOK 5,000 per square meter. So we clearly see that this gap is going to be narrowed over the years to come and the projects which start in the neighboring area will also reinforce and strengthen this transitioning, which has already started. So we also continue to work on optimizing our project in Stenersgata 1 Phase 2, which is located in the bottom left of this picture next to the NOK 4,000 mark. That's the Phase 1 of that building project. And once we get the anchor tenant we're looking for, we will also be able to start that project. A few words on the Norwegian economy. It has remained robust through the global market volatility in 2025, and we are well positioned with the Norwegian oil fund also to stabilize the economy through fiscal policies and public spending. Mainline GDP growth is expected to be somewhere around 1.5% and 1.7% going forward. Employment growth has remained stable around 0.7% in the last couple of years and is expected to stay around those levels also going forward. In Oslo, however, we've seen that in 2025, the employment growth was lower, around 0.3%, and that was also mainly driven by the public sector, which currently is transitioning into more space-efficient workplace strategies, meaning that we are not getting much tailwind from the employment growth in the Oslo market currently. The key policy rate has been reduced to 4% in September. Expectations from Norges Bank has been that we could potentially see further rate cuts with cut per year over the next 3 years. CPI for January, however, came in higher than expected with an adjusted CPI of 3.4% versus the Norges Bank's forecast or estimates of 2.9%. So forward interest rates now indicate lower probability of rate cuts in the near term. Entra's contracts are indexed based on the November index. And from January, that means 3% indexation for our portfolio. If we move on to the letting market, we have seen that the total volumes signed in 2025 were in line with expectations, slightly lower maybe than what would have been expected based on the future expiries in the market database. We have, however, seen that the tenant search activity picked up through the fourth quarter coming also into the first quarter and are currently also seeing quite a lot of activity in the letting market. The vacancy is currently around 7% in Oslo, expected to remain around those levels with some variations between clusters, some clusters also above 10%. Same goes for Bergen vacancy levels. Now if you look at the expected market rental growth for the next 3 years, according to our consensus report top right, the growth is expected to be around 12% over the next 3 years. If we look into Areal statistics database, we have actually seen that in the inner city center of Oslo, the area which I previously showed on the map, the market rental growth from the fourth quarter in '24 until the fourth quarter of '25 in the top segment was actually 13%, which clearly supports that there is willingness to pay for the CapEx required to deliver projects in this area. New build volumes are expected to remain low in the next years with -- seeing that we also have had a few new project starts in the recent years. A few words on the transaction market. The financing markets are available and lending sentiment is positive with credit margins tightening through the fourth quarter, both in bank and bonds. The transaction volumes for 2025 came in at around NOK 87 billion, slightly below normal historic levels. We saw that the segment split, office represented 22% of that volume, while more normal levels would be between 40% to 45%. So more activity than within segments like logistics and also residential portfolios. The prime rent in Oslo -- sorry, prime yield in Oslo is currently around 4.5% and is expected to remain around those levels going forward according to our consensus report. We can see that we have seen transactions supporting those prime yields and also that there is continued interest for prime assets and also central city offices in the market, primarily from equity buyers on these current yields. And our assessment is that at these yield levels and with the forecasted consensus on inflation, equity buyers are still able to achieve their return targets with 7% to 8% potential. And that we also see that the market players are confident or comfortable that we will see a real rent growth also in the years to come. So that also supports the current yield levels. Okay. I think that leaves it for me for now, and we'll get some more details from you, Ole.
Ole Gulsvik: Thank you, Sonja. In Q4, our financial performance improved compared to previous periods. Rental income came in at NOK 787 million, up from NOK 767 million in the fourth quarter last year. We had positive -- net positive impact from realized projects of NOK 19 million and also a positive impact from CPI growth of NOK 17 million. This was partly offset by negative like-for-like of NOK 10 million due to increased vacancy as well as a negative NOK 5 million due to divestments. The rental income is NOK 15 million higher compared to the bridge that we presented in the third quarter. This is a larger than normal deviation due to a combination of positive one-offs as well as letting effects. Net income from property management came in at NOK 425 million, up from NOK 317 million in the fourth quarter last year. In Q4, we had positive gain from the forward sold development project, Holtermanns veg in Trondheim of NOK 101 million. Adjusted for this gain, we report underlying result improvement in the quarter, supported by both rental income growth and by reduced financing costs. Profit before tax came in at NOK 476 million, which includes both the mentioned gain from the Holtermanns veg project as well as positive NOK 56 million in net value changes. In the fourth quarter last year, we had net value changes positive of NOK 457 million, which explains the reduction in pretax profit from the fourth quarter last year to the fourth quarter this year. I have already gone through the rental income part, but I will give you some more flavors on the other P&L items. OpEx came in at NOK 80 million or 10.2% of rental income. This is above previous quarters. In Q4, the OpEx was particularly high due to timing of maintenance cost and to a certain degree, higher vacancy cost. The OpEx percentage level for the full year of 2025 is a realistic indication of the cost level also going into 2026. If we look at other revenue, other costs, this was net positively impacted by the gain of NOK 101 million on the forward sold Holtermanns veg project in Trondheim, as mentioned earlier. Admin cost is up to NOK 55 million due to increased personnel costs and a couple of nonrecurring items in the quarter. We have managed to scale the admin costs for several years by offsetting some of the wage increases with efficiency measures and other cost reductions, and we target to continue to improve the admin cost ratio also for 2026. Net realized financials came in at NOK 336 million, which is down NOK 10 million to previous -- or to the last quarter. This is due to lower debt following the settlement of Holtermanns veg. Value changes in our investment properties were positive with NOK 111 million, and I will come back with more on this later on in the presentation. We had negative value changes in our financial instruments of NOK 55 million, and this is mainly due to 1 quarter shorter duration in our positive market value positions from 2021 and 2022. And the value of the interest rate hedges will gradually be reduced until maturity. And this gave then a profit before tax of NOK 476 million. Moving then to our rental income development. Looking forward, the model indicates rental income in the first quarter to be NOK 794 million. This is NOK 13 million higher than the bridge we presented in the third quarter. For 2026 as a whole, the total rental income in the bridge is up nearly NOK 40 million compared to the bridge that we presented in the third quarter, of which nearly NOK 10 million is due to higher-than-expected CPI, about NOK 15 million is related to letting effects. And lastly, some of the compensation we did for one-offs in Q3 was too conservative, and we, therefore, rebalanced our model slightly. This graph is not the guidance. It just highlights the rental income based on reported events in existing contracts. There is upside to this bridge as also presented in previous quarters. Firstly, we aim to let out existing vacant space, which has a total rental income potential of NOK 211 million. In addition to this, we have available vacant space in the reported ongoing project portfolio with an annual rent potential of NOK 21 million. And lastly, there is a market rent reversal potential of NOK 161 million. Moving then to our property value, which is slightly down to NOK 63.6 billion in the quarter. Divestments of negative NOK 841 million is related to the sale of Holtermanns veg. Value changes were positive with NOK 111 million in the quarter, which is a limited value increase of only 0.15%. The positive value impact is predominantly a slight increase in the CPI for 2026 compared to the estimates in previous quarters, and this was partly offset by a rent reduction on certain specific assets in the quarter. The deviation between the appraisals has come gradually down over the last few quarters and is now only 0.5%. CapEx in the quarter was NOK 249 million, which has also come gradually down over the last few years. We will continue to have a disciplined investment strategy going forward and prioritize defensive CapEx to increase occupancy and realize market rent uplift. The portfolio net yields now stands at 5.04% and 5.70% fully let at market rent. On the right-hand side, you can see that the net asset value increased from NOK 167 per share to NOK 169 per share in the quarter. In addition to this, we also paid out NOK 1.1 in dividend in the fourth quarter, which brings the total dividend since the IPO to NOK 38 per share. Moving then to our debt metrics, which continued to improve in the quarter. The ICR looks like have bottomed out and improved to 2.14 measured over the last 12 months. Leverage ratio also improved going from 48.8% to 48.0% and the net debt-to-EBITDA is down to 11.0. The debt metrics in the fourth quarter is supported by the gains of the Holtermanns veg sale. However, we will continue to have a conservative approach when it comes to both leverage and interest risk going forward. And we, therefore, expect a gradual positive development in our debt metrics going forward. This is supported by the running cash flow from our property management, a conservative and disciplined capital use as well as potential for value increases in our property portfolio over time. We have created a solid financial platform in 2025 with an average time to maturity for total debt of 3.6 years. The debt capital market was open with tightening spreads also during the fourth quarter. We issued NOK 750 million in new green unsecured bonds, both 6-year fixed bonds, which we swapped to NIBOR plus 118 basis points, and we did floating bonds at 5.5 years at 113 basis points. In total, we have issued NOK 6.7 billion in bonds during 2025, and the debt capital market remains attractive and open in the beginning of 2026. As you can see in this graph to the right, we have undrawn bank credit lines of NOK 7.7 billion committed until 2028. We have reduced our bank lines during the quarter to optimize our funding cost, but we still have ample available liquidity in the next 24 months. We also see that the bank spreads are coming in during the quarter, and we will continue to work to optimize our total funding costs during 2026. On the left-hand side, you can see that 68% of our debt financing is now green, and we have the capacity to issue more green debt with our existing environmental-friendly property portfolio. Moving then to the cost of debt. The all-in net financial cost is down to 4.31%, while interest rate on our interest-bearing debt is slightly up to 3.97% in the quarter. The forward curve has shifted slightly upwards in the fourth quarter. However, our interest rate forecast is more or less unchanged from what we presented in the third quarter as we compensated higher interest rate outlook with lower credit margins in our bank debt during the quarter. As you can see in this graph, we estimate slightly increasing but relatively stable interest rates going forward, and this is due to improved credit margins, our existing hedges as well as future policy rating cuts according to market expectations. As Sonja mentioned earlier, the Board has proposed to pay out NOK 1.1 per share in dividend for the second half of 2025. This corresponds to 32% of the cash earnings or the underlying cash earnings in the period. This is the same amount as we paid out in the first half of the year, which gives a total dividend of NOK 2.20 per share in 2025. In addition, the Board has decided to initiate a share buyback program of up to 0.5% of the outstanding shares with the proceed from the gain from the Holtermanns veg project in the fourth quarter. This totals approximately NOK 100 million in value. The shares will be proposed to be canceled at the Annual General Meeting at the 21st of April. The Entra share is currently trading at approximately 33% discount to net asset value. And with the share buyback, we are efficiently buying our own assets at 15% discount. And we believe this is a good investment and creates shareholder value. Dividends and buybacks combined total capital distribution yield of approximately 2.4% and 36% of the cash earnings in 2025. The capital distribution level is in line with the revised dividend policy to distribute a minimum 30% of cash earnings with room to distribute more capital over time as financial conditions permits.
Sonja Horn: Okay. Thank you, Ole. So before I do some closing remarks, I think it's good to also reflect a bit about on the achievements we've had through 2025. First of all, we improved our financial performance and debt metrics. We have had solid gross letting volumes in what I would describe as a more muted demand environment in the Oslo market. We have had property value changes. So we're back in the positive territory here. And the financial flexibility has been secured through the restructuring of our bank facilities and also by reestablishing Entra in the bond market. We have clearly articulated our return targets and supported that by capital discipline across the portfolio and resumed semiannual distributions to our shareholders. We are also well positioned now to capitalize on previous investments in environmental qualities with an already very energy-efficient portfolio. And from that to a few closing remarks, we've had -- pleased to see that we are now once again proposing cash dividends of NOK 1.1 per share and also that we are initiating a share buyback program based on the proceeds from the Trondheim sale. In the fourth quarter, we also see examples that we are able of unlocking value from the project development and transactions with the successful divestment in Trondheim and also the capital efficient and very value-accretive project realization we expect to see in Christian Krohgs gate 2. The letting market fundamentals continue to look promising, supported also by a stable Norwegian economy, where we expect to see also positive employment growth going forward. And I'm pleased to see that the activity in the tenant market picked up during the fourth quarter and also feeding into the first quarter this year. And we are now also seeing the first signs of market rents reaching the breakeven levels we need to see to have accretive projects, particularly in the city center of Oslo. So Entra will continue to deliver future rental income growth driven by CPI, letting of vacant space and capturing the reversion potential in the portfolio and also selective projects going forward. So when we look forward, the priority is clear. We continue to focus on improving profitability through increasing the occupancy and capturing reversion potential through selective project development and asset rotation and continue to have a disciplined approach to capital allocation, preserving our balance sheet strength and funding flexibility and also deploying capital where we find it to be most accretive or also through capital distributions. So I think that sums it up for today. And let's see if we have any questions, Isabel?
Isabel Vindenes: Yes, we have got one question in. Can you please provide more details on the rental market demand and discussion with potential tenants and the risk for higher vacancy?
Sonja Horn: Okay. So that's 3 questions. Let's see. A bit more flavor on the market. As I said, we are in a market where we have employment growth, which is a positive. What we saw through 2025, however, is that in Oslo, the employment growth was driven by the public sector tenants, which are currently reducing their space when renegotiated -- renegotiation. And in the private sector, we have experienced through 2025, more wait-and-see mode. I hope to see that we'll see more activity also within the private sector going forward following that we have at least had a few rate cuts. So hopefully, a stable demand side, that's our base case going forward. And if you look at where do the tenants want to go? They want to go more into the city center. So the tenant search activity, which we see now are much more heavily dominated towards the city center locations. And if you look at the city center locations, our products are in the less expensive parts of the city center compared to CBD. So we can offer relative more value in our products than other locations in the city center. So I'm very confident that we will be able to bring our occupancy up. Having said that, we also experienced that the letting processes are very timely because our tenants need time to reassess how they want to sit and work. And we can easily use on the large searches more than a year before they conclude. And on the shorter ones, the absolute shortest is 3 months. So it will take time to get the contracts signed. But based on our leads pipeline now, we have good activity, progressed also leases but then again, there's competition. So if you get -- if you win them, I'm very confident that we'll see occupancy come up in the short term, but we probably also will lose some of these competitions we are in. So I'm -- I think it's difficult to give clear guidance exactly on how our vacancy will develop in the short term. But I'm very confident that we're going to bring occupancy back about north of those 95% over time. But where we'll be through this year, somewhere between 93% and 95%, maybe, but it's difficult to be very precise on that. Maybe also a few notes on net letting because we know also that we have 3 large tenants in this -- 3 of our large tenants in Entra who are on lease searches, and they will probably also conclude through 2026. So we're well prepared, work very well to ensure that we are going to be the preferred landlord. But at the same time, if you lose one of those, it will also affect our net letting through 2025. So it's a bit binary how we end up. But these large leases, they will still be sitting with us 1 through 2027, 1 through 2028 and 1 through 2029. So that also tells you that tenants are planning 4 years ahead, giving us time to solve the letting if they should choose to go elsewhere. So a long answer. I hope that was helpful, but we are, of course, available for chat if somebody wants more flavor on that.
Isabel Vindenes: Thank you, Sonja. There are no further questions today.
Sonja Horn: Okay. Thank you all for following us, and feel free to get in touch if we can help with some more information. Have a nice day.