Entra ASACompany Presentation, August 2018
Agenda
2
About Entra
Market and key financials
Green Bond financing
Summary
Q&A
Overview of Entra
• A leading owner, manager and developer of Norwegian office properties
• Strong, fully integrated real estate platform
• Focused on large, flexible, high-quality assets in centrally-located office markets close to public transportation hubs
• Management portfolio constitutes 87% of total sqm area, and 94% of the total value
• Solid track record and strong financial and operating profile
Key figures as of 30.06.18
3
Biskop Gunnerusgt 14 Oslo
National LibraryOslo
SundtkvartaletOslo
Number of Properties* 88
Total Area (’000s)* 1 263 sqm
Occupancy Rate (management portfolio) 96.7 %
WAULT (total portfolio) 7.4 years
Public sector tenants (share of rental income) 64 %
Property Market Value* 43.7 bn
Net Interest-Bearing Debt 17.9 bn
Interest Coverage Ratio 3,7x
Loan-to-Value 40.6 %* Total portfolio, incl project portfolio and development sites
7 4809 616
11 56713 338
15 567
18 430
22 56720 091
21 343 22 32823 740
25 885 26 809
30 850
33 619
38 890
43 410
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Tota
l ass
et v
alue
(NO
K m
)
Builds Powerhouse Brattørkaia
(18.200 sqm)
Strong track record of growth and value development
4
Buys and develops BG14
in Oslo
Develops Høgskolen iAkershus
Buys and developsMunch-kv.
in Oslo
Buys the National Library
Buys 1/3 ofOslo S
utvikling
Buys Havnelageret
in Oslo RehabilitatesMiddelthunsgate
29 in Oslo
BuildsNonnesetergaten 4
in Bergen
DevelopsBrattørkaiain Trondheim
BuildsPapirbredden 2
iDrammen
Rehabilitates Fr. Selmersvei
4 in Oslo
BuildsPapirbredden In Drammen
Rehabilitates Powerhouse,
Kjørbo
DevelopsRockheimiTrondheim
Buys 50% avHinna Park JV
Buys 100% avAS Lilletorget 12
Established in July 2000 as a spin-off
from Statsbygg
Buys office part of Oslo City
Buys Trondheimsporten
Buys project Schweigaardsgt16 in Oslo
Buys Skøyen-portfolio
(61.000 sqm)
Sundtkvartalet-project
finalised
Strømsveien96finalised
FinalisedMedia City Bergen(45.000 sqm)
Builds Tullinkvartalet(21.000 sqm)
64 %
36 %Public
Private
Sustainable cash flow; Premium tenants on long leases
High degree of public tenants
Diversified lease maturities with 7.4 years WAULT
Solid and diversified tenant structure
5
Tenant In % of
rent
Sector Norwegian Tax Administration 5.6 % Public The Norwegian National Rail Administration 3.9 % Public Norwegian Directorate of Health 3.9 % Public National Library of Norway 3.5 % Public Bane NOR SF 3.3 % Public Municipality Undertaking for Defence Buildings 2.0 % Public The Immigration Appeals Board 2.0 % Public Norway Post 2.0 % Public Borgarting Court of Appeal 1.8 % Public University College of Southeast Norway 1.8 % Public Circle K AS 1.6 % Private County Governor of Oslo and Akershus 1.6 % Public Bærum Municipality 1.6 % Public Norconsult AS 1.5 % Private The Norwegian Public Service Pension Fund 1.5 % Public Norwegian Petroleum Directorate 1.5 % Public Asker and Bærum Police District 1.4 % Public Oslo Municipality Undertaking for Social Services Buildings 1.4 % Public Norwegian Environment Agency 1.4 % Public Directorate of Norwegian Customs 1.4 % Public 44.8 %
Large, high-quality office portfolio in the largest cities
6
Trondheim9 %
Bergen9 %
Stavanger 5 %
Drammen5 %
Oslo, incl Sandvika74 %
Portfolio value:
NOK 44 bnProperty portfolio:
1.3 mill sqm
Management 87 %
Development8 %
Project 5%
By type (sqm)By segment (sqm)
Office 91 %
Culture 4 %Education 5%
Profitable growth
Strategy
High customer satisfaction
Enviromental leadership
Strategic target: Profitable growth
8
1 6321 772 1 760
1 8992 075
72%
79%81%
85% 87%
60%
70%
80%
90%
100%
0
500
1 000
1 500
2 000
2 500
2013 2014 2015 2016 2017
Rental income and EBIT margin Total asset value and EPRA NAV per share
26,9
30,933,6
38,9
43,4
76
89
101
127
50
70
90
110
130
150
0
10
20
30
40
50
2013 2014 2015 2016 2017
NOK mill % NOK bn NOK+ 27 % + 61 %
Strategic target: Best in class customer satisfaction
9
Portfolio occupancyCustomer satisfaction score
7274
8285 85
6972
77 7780
50
55
60
65
70
75
80
85
90
95
100
2013 2014 2015 2016 2017
Entra Industry Average (Norsk leietakerindeks)
95,8 94,6 95,096,8 97,0
50
55
60
65
70
75
80
85
90
95
100
2013 2014 2015 2016 2017
(%)
Strategic target: Environmental leadership
1010
202 199
188
171
155 152143
216222 218
205200
173
100
120
140
160
180
200
220
240
2011 2012 2013 2014 2015 2016 2017
Entra Industry Average (Enova)
Energy consumption (Kwh/sqm) Revised environmental strategy
Strong market position in Oslo
Helsfyr/Bryn
Portfolio strategy; Location І Clusters І Size І Quality
11
• Environment friendly office properties close to transportation hubs• Size and flexibility a competitive advantage
Strategic property portfolio rotationSignificant divestments over the last three years – exiting old and ineffective properties at remote locations
12
Re-investing in central and high quality assets through several large property purchases and project development
Purchased properties AreaTransaction
quarter No of sqmTransaction
valueClosing
dateBryn portfolio Oslo Q2 2018 57 000 1 100 Q3 2018
Johannes Bruns gt16/16A, Nygårdsvn 91/93 Bergen Q2 2018 - 135 Q2/Q4 2018
Nils Hansens vei 20 Oslo Q1 2018 3 150 50 03.04.2018
50 % of Sundtkvartalet Oslo Q3 2017 31 300 795 02.10.2017
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
Office part of Oslo City Oslo Q4 2015 40 250 1 650 31.12.2015
Trondheimsporten Trondheim Q4 2015 28 600 163 18.12.2015
Sum 230 400 6 630
Sold properties AreaTransaction
quarter No of sqmTransaction
value Closing date
Tungasletta 2 Trondheim Q4 2017 14 800 180 31.01.2018
Middelthunsgate 29 Oslo Q4 2017 28 600 1 270 28.12.2017
Wergelandsveien 29 Oslo Q2 2017 3 373 160 30.09.2017
Akersgata 32 (Sections) Oslo Q2 2017 2 100 94 30.06.2017
Lømslands vei 23 Kristiansand Q2 2017 1 423 11 30.06.2017
Kristiansand portfolio Kristiansand Q2 2017 45 000 863 31.05.2017
Moloveien 10 Bodø Q1 2017 5 531 83 15.02.2017
Kongensgate 85/Erling Skakkesgate 60 Trondheim Q4 2016 1 769 16 31.03.2017
Kalfarveien 31 Bergen Q2 2016 8 440 85 01.02.2017
Fritznersgate 12 Oslo Q2 2016 824 53 15.09.2016
Telemarksgata 11 Skien Q2 2016 4 300 11 01.11.2016
Ringstadbekk AS Bærum Q1 2016 5 570 114 06.04.2018
Strandveien 13 Tromsø Q4 2015 11 560 158 28.01.2016
Gullfaks, Hinna Park Stavanger Q3 2015 17 900 727 30.10.2016
Keysersgate 15 Oslo Q1 2015 315 16 01.03.2015
Portfolio of six properties Moss, Skien, Lillestrøm Q1 2015 62 918 1 375 24.02.2015
Sum 214 423 5 216
Acquired large development project at Bryn in Oslo
Bryn, Oslo
13
• Current property portfolio:− 8 buildings, 57,000 square meters− Annual rent NOK 60 million, duration of ~ 4 years
• Land plot of 38,000 sqm − Expected development potential: ~120,000 sqm− Aiming for approx 50 % office and 50 % residential development
• Price: NOK 1.1 bn on closing + up to 0.3 bn when zoned
• JM to buy the residential development when zoned
New development area Excisting Entra properties
Ownership (%) LocationExpected
completionProject area
(sqm)Occupancy
(%)
Estimated total project cost*
(NOKm)
Of whichaccrued*
(NOKm)Yield on
cost**
Powerhouse Kjørbo, block 2 100 Sandvika Oct-18 3 950 100 122 113 6.4
Powerhouse Brattørkaia 17 A 100 Trondheim Mar-19 18 200 78 523 405 6.1
Tollbugata 1 A 100 Oslo Oct-19 9 000 100 460 202 5.1
Tullinkvartalet (UIO) 100 Oslo Dec-19 21 000 92 1 489 886 5.5
Holtermanns veg 1-13 100 Trondheim Jan-20 11 700 53 340 41 6.0
Total 63 850 2 934 1 648
* 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)
Project Portfolio
14
Significant project pipeline (selected examples)
15
Ongoing projects
~ 63,850 sqm
Advanced / completed zoning
~ 150,000 sqm
Holtermannsveg 1, Trondheim
Universitetsgata 7-9, Oslo Universitetsgata 2, Oslo
Strømsveien 106, Oslo Oslo Solar (Lilletorget), Oslo Urban Mountain (BG14), Oslo
Early stage
~ 300,000 sqm
Tullinkvartalet (UiO), Oslo Brattørkaia 17, Trondheim
Schweiggardsgt 15a, Oslo
Agenda
16
About Entra
Market and key financials
Green Bond financing
Summary
Q&A
Market developmentRent and vacancy
• Economic growth picking up − Interest rates expected to increase, but also
growth in GDP and employment
• Oslo− Strong employment growth− Supply side limited next two years− Significant uplift in market rents
• Regional cities;− Increasing market rents in Bergen and
Trondheim city centre− Optimism back in Stavanger, stable rent levels
in city centre and at Hinna Park
Source: Entra consensus report, average of estimates from leading market specialists in Norwegian market. Nominal rental value growth
17
Market rental growth and vacancy in Oslo*
10,9 %8.0 %
4.6 %4.1 %
-3.0 %
1.9 %
5.1 %
7,9 %
5.7 %
3.2 %
7.1 % 7.2 % 7.4 % 7.8 %8.4 %
7.8 %7.1 %
6.4 % 6.1 % 6.2 %
-5%
0%
5%
10%
2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e
Rental growth central Oslo assets Vacancy Oslo and Bærum
5.8 % 5.2 % 5.3 % 5.2 % 4.7 % 4.1 % 3.8 % 3.7 % 3.8 % 3.9 %
0%
2%
4%
6%
8%
2010 2011 2012 2013 2014 2015 2016 2017e 2018e 2019e
Market developmentTransactions and yields
• Well-functioning debt markets supporting the transaction market− Increasing activity in Q2
• Yields remain stable at low levels− Expected to slide upwards − Valuation effects balanced by market rent
outlook
* Source: Entra consensus report, April 2018. Estimates from leading market specialists in Norwegian market
18
Total transaction volume (NOKbn)*
Prime yield Oslo*
38 3552
4062
123
7487
72 70
0
50
100
150
2010 2011 2012 2013 2014 2015 2016 2017 2018e 2019e
517 507 526 545 558
0
100
200
300
400
500
600
Q2 17 Q3 17 Q4 17 Q1 18 Q2 18
1 446
1 031
1 251
856 843
0
200
400
600
800
1000
1200
1400
1600
Q2 17 Q3 17 Q4 17 Q1 18 Q2 18
328 307 314349 364
0
100
200
300
400
500
600
Q2 17 Q3 17 Q4 17 Q1 18 Q2 18
Key financials
Rental income (NOKm)
Net income from property management (NOKm)
Profit before tax(NOKm)
19
8 % -42 %11 %
0
0,5
1
1,5
2
2,5
3
3,5
4
20%
25%
30%
35%
40%
45%
50%
55%
Q2-
15
Q3-
15
Q4-
15
Q1-
16
Q2-
16
Q3-
16
Q4-
16
Q1-
17
Q2-
17
Q3-
17
Q4-
17
Q1-
18
Q2-
18
Loan-To-Value (left axis) ICR (right axis)
2,25%
2,75%
3,25%
3,75%
4,25%
4,75%
5,25%
Q2-
14
Q2
15
Q2
16
Q2
17
Q2
18
Q2
19
Q2
20
Q2
21
Average interest rate
Estimated interest rate using swap forward curve
Financial profile
LTV and ICRFinancing mix Development in avg. interest rate
20
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
20 000
Q2-
15Q
3-15
Q4-
15Q
1-16
Q2-
16Q
3-16
Q4-
16Q
1-17
Q2-
17Q
3-17
Q4-
17Q
1-18
Q2-
18
Bonds Commercal paper Bank
3.7
40.6
Balanced debt maturity profile and 202% capital commitment
21
826
1 700 2 0001 200
6 000
827 2 322
441
7 092
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
Q2-2018 0-1 yrs 1-2 yrs 2-3 yrs 3-4 yrs 4+ yrs
Commercial paper (NOKm) Bonds (NOKm) Bank loans (NOKm) Unutilised credit facilities and cash (NOKm)
-
1 500
2 500
910
2 000
-
500
1 000
1 500
2 000
2 500
0-1 yrs 1-2 yrs 2-3 yrs 3-4 yrs 4+ yrsUnutilised credit facilities (NOKm)
• Capital structure is a central topic within real estate as leverage is important for the equity return and the perceived risk of the business
• Assessments regarding financial risk capacity and limits to financial risk exposure is thus of high importance
• The Group manages financial risk in accordance with a framework included in the financial policy
• The main financial risks are financial leverage, financing risk, interest rate risk and credit risk
Financial risk management
22
Financial risk 30.06.2018 Financial policy
Financial leverage
Loan-to-value (LTV) 40,6% Below 50%over time
Financing risk
Financing commitments next 12m 202% Min. 100%Average time to maturity (debt) 4,8 Min. 3 yearsDebt maturities <12 months 19% Max. 30%
Interest rate riskInterest coverage ratio (ICR) 3,7 Min. 1.8xAverage time to maturity (hedges) 3,9 2-6 yearsMaturity of hedges <12 months 46% Max 50%
Credit risk / currency exposureCounterpart's credit rating Fulfilled Min. A-/A3Share of debt per counterparty 7,5% Max. 40%Currency exposure Fulfilled 0
Agenda
23
About Entra
Market and key financials
Green Bond financing
Summary
Q&A
Introduction to Green Bonds• Green bonds are broadly defined as fixed-income securities that raise
capital for a project with specific environmental benefits
• Green Bonds are designed to encourage sustainable investments
• Five pillars of the green bond framework:− Simplicity – Green Bonds are issued under the same documentation as
regular bonds− Governance/Selection process - projects are selected based on criteria set
out in the green bond framework− Credibility – second opinion of the green bond framework from
environmental specialists, i.e. CICERO− Traceability – the net proceeds will credited to earmarked accounts at the
issuers− Transparency/reporting – the issuer will report to the green bond
investors on an annually basis in the form of a “Green Bond Report”
24
Entra’s Green Bond Framework
• Entra issued its inaugural Green Bond in September 2016
• The Green Bond Framework was constructed with the intention of reinforcing the current environmental leadership of Entra
• The Green Bond Framework was revised in April 2018 to also include buildings which attain certification Breeam In-Use Excellent – as 80-90 % of the greenhouse gases are emitted during the operational phase of a building lifespan
• Entra’s revised Green Bond Framework – main qualifiers for Eligible Projects − Commercial or residential buildings with an energy use per year on a kWh/m2 basis that, at the time of approval by Entra
of that project, is at least 30 per cent lower than the Norwegian government agency Enova’s most recent annual industry average, and that meet one of the following requirements:− Commercial and residential properties with certification from BREEAM-NOR with a minimum certification of “Excellent”;− Commercial and residential properties with a minimum BREEAM In-Use certification of “Excellent”
25
Second opinion of Green Bond Framework by CICEROCICERO grades with shades of green
26
Projects and solutions that realise the long term vision of a low-carbon and climate-resilient future already today. Typically, this will entail zero-emission solutions and governance structures that integrate environment concerns into all activities. Example projects include renewable energy projects such as solar or wind
Projects and solutions that represent steps towards the long-term vision, but are not quite there yet. Example projects include sustainable buildings with good (but not excellent) energy efficiency ratings
Projects and solutions that are environmentally friendly but are not by themselves a part of the long-term vision. Example projects include energy efficiency improvements in fossil-based industry that result in short-term reductions of greenhouse gas emissions, and diesel-fueled buses
Dark green
Medium green
Light green
27
CICERO – Second opinion
CICERO – Second opinion
• Based on an overall assessment of the project types that will be financed as well as governance, reporting and transparency considerations, Entra’s Green Bond Framework gets a Dark Green shading”
“
Strengths: Weaknesses:• No significant weaknesses perceived”“• Through its strategic framework and other policies, Entra is
deeply committed to contribute to a green transition towards a low carbon society in the longer run
• Entra has proved to be an environmental leader in the building sector in Norway and has been responsible for some dark green and very innovative building projects
• Entra complies with national and international environmental requirements and takes an active responsibility for reducing negative environmental impacts beyond such requirements
• Entra also takes responsibility outside its own value chain by contributing to the sector and to the customers’ development
Potential green bond pipeline
• New university building planned for the University of Oslo, Faculty of Law
• Size: 21,000 sqm• Expected construction
period: 2017-2019• Zoning status: zoning plan
approved• Target certification:
BREEAM Excellent
Tullinkvartalet, Oslo• New office building• Size: 30-50,000 sqm• Zoning initiated• Target certification: BREEAM
Outstanding
Oslo Solar, Oslo• Size: 31,300 sqm• Occupancy: 9x % let• New office building • Project completion ultimo
2016• BREEAM-NOR Excellent
Sundtkvartalet, Oslo
• Size: 37,970 m2• Occupancy: 91 %• Main tenant: Norwegian
Tax Authority• Fully renovated in 2013• BREEAM In-Use Excellent
in 2017
Fredrik Selmers vei 4, Oslo
• Size: 14,105 sqm• Occupancy: fully let• Main tenant: :
Norwegian Environment Agency1
• New build: 2013• BREEAM In-Use
Excellent 2018
Brattørkaia 15,Trondheim
• Size: 11,700 sqm• Occupancy: 53 % pre-let
(Norwegian Tax Adm.)• New office building • Project completion primo
2019• BREEAM-NOR Excellent
Holtemannsvei 1-13, Trondheim
• Size: 6.894 sqm• Occupancy: 100 %• Main tenant: Asplan Viak• Fully renovated 2014• BREEAM NOR
Outstanding
Powerhouse, Kjørbo
• Size: 15,498 sqm• Occupancy: fully let• Main tenant: Circle K• New build: 2015• BREEAM NOR Excellent
Circle K Building, Schweigaardsgt. Oslo
• Size: 15,000 sqm• Occupancy: 78 % pre-let• Main tenant: Enova,
Teekay• New build 2019• BREEAM NOR Outstanding
Powerhouse Brattørkaia, Trondheim
• Size: 8,350 sqm• Occupancy: fully let• Main tenant: Norwegian
Business School• New build: 2017• BREEAM NOR Excellent
BI Brattørkaia, Trondheim
• Size: 4,200 sqm• Occupancy: 100%• Main tenant: Norconsult• Fully renovated 2017• BREEAM NOR Excellent
Powerhouse II, Kjørbo
NOK bn
Agenda
29
About Entra
Market and key financials
Green Bond financing
Summary
Q&A
30
Summary
• Entra is one of Norway’s leading real estate companies with a solid track record and strong financial and operating profile− Solid tenant structure with 64 % public tenants− WAULT of 7.4 years
• Attractive market dynamics within real estate going forward− Supportive macro outlook− Strong and broad uplift in market rents in Oslo− Well-functioning debt markets supporting the transaction market− Prime yield remain stable at low levels− Short term portfolio consolidation, but growth to continue − Solid development pipeline further strengthened, both short and long term
• Environmental leadership is a strategic priority for Entra− Entra is now established as a high quality green bond issuer− Entra will pursue Green Bond financing going forward, it expands the
funding base, provides attractive financing costs, and reinforces the environmental leadership
Universitetsgata 7-9, Oslo. New-build project started in Q3-18
For more information see www.entra.no/investor-relations
Tore Lia Head of Finance & TreasuryEntra ASAMobile: +47 468 10 820E-mail: [email protected]