Olav Thon Eiendomsselskap ASA

A warm welcome to this presentation by Olof Toon Real Estate and the report for Q1 2023. The ticker this time is a good operational result in a quarter marked by increased uncertainty and rising interest rates. We have set up an agenda that resembles what we have had for previous reasons. such as the main points in the quarter, the main figures in more detail, shareholding conditions, financial conditions, sustainability and value creation, a bit about the portfolio, investments, a bit about the framework requirements, and then we have a Q&A session at the end, so those of you who have questions along the way can send them in, and then they will be answered in bulk at the end. And remember, no questions are stupid, they are just a little more specific than others, and we hope to be able to answer most of them. The first quarter in the short term, as mentioned, a good operational result, but changes in the value of the property portfolio primarily, dampens the surplus. We still have a surplus, the result before the tax on 234 million, that's not much, a strong decline from last year. But if we look at the results before the tax, valuation and currency positions, we were actually at an all-time high when it came to the quarter, namely 594 million. We have a solid financial foundation, and the shareholder share was 52%. The loan rate remained at a low 35%. We have a solid liquidity reserve, almost 4.6 billion. In relation to the withdrawal in the next 12 months, we have very good margin. We will come back to that later. We had a relatively stable development in the share exchange, with a decline of 3% in the first quarter. The purchase center turnover increased by 8.6% from Q1 2022 and 15% from 2019. The figures look good, and they are good, and we are pleased with them, but we must not forget that there has been inflation in the period, so the real growth is of course significantly lower. We have also made some major investments in the quarter. In January, the company took over the remaining 50% of the ownership of the Sørland Center in Kristiansand, the largest shopping center in Sørland, and we became the sole owner of the center. Sørland Center was number 6 in terms of revenue in Norway last year. The main figures I have gulet out are what I want to focus specifically on. The gross income increases by almost 7%, from 840 to 905 million kroner. Further down we see how the value changes in this are compared to last quarter, not the first quarter of 2022. This is for a better way of presenting the dynamics in the group. We see that the value changes were lower than they were in the previous quarter. We also see that the next yellow line, namely the result before taxes, value changes and currency, increased significantly from the previous quarter. more than 25% of the entire year 2022. The degree of reward, if we include joint control of the company and the associated company, was 34%, while it was 33% at the end of the year. The liquidity reserves are maintained at a comfortable high level. The equity capital increases, and the only thing that goes down is the share price, as mentioned, so it went down by 3%. Substance value per share also increases marginally in the quarter. So in total, we are quite satisfied with our main figures in the quarter. Let's move on to the relationship between shareholders. To the left, in this picture, is the prospect from the drawing of shares in the Olatone real estate company from 1983. That's 40 years ago, and we're almost done with the magic of Norway's oldest listed real estate company. A lot has happened since 1983, both in society and in the Olatone real estate company. What has happened least is perhaps the gentleman on the left, Olav Thun. He is somewhat the same today, 40 years later, even though he was only 60 years old at the time. Since 1983, the stock price value has increased from 200 million to 18.6 billion. The annual income level in the N-portfolio has increased from 27 to 3.66. The stock price has given an annual drop of 12 to 13%. And it has been 40 years with surplus before value adjustment of the property portfolio. We think this is nice to be able to put forward. There has been a lot of focus on the share price development in recent years. In the table on the far left, we have shown how the share price development has been compared to Oslo Børs in this quarter. Last 12 months, last 24, last 36 and last 60. So two, three and the last five years. We could all have wished for a better share price development, but we think that when we compare both Oslo Børs and other property companies, that we have had a decent development in the last two, three and five years. It has not been catastrophic to be an shareholder in the Olatun property company. On the contrary, we now have the last five years ago, had a reduction of 30 percent. If you were so lucky and bought it three years ago, after the pandemic had started to roll over the country, then you actually had a reduction of 65 percent. We also think that is quite usable. We must remember, in comparison with Oslo Børs, that it is composed of sectors that have developed in a different way than the property industry, When we think about the last five years, we have had various waves of speculation about the death of shopping malls. There has been speculation about the death of shopping malls because of the online trade. There has been a pandemic, etc., etc. All in all, we think that the stock exchange rate has been usable. We now have 3,700 shareholders from 15 countries. 98% of them are Norwegian investors. Olav Thun Group is the largest owner with 74%. We own 2.1% of our own shares. They were decided to be sold to the Gårdshagens General Assembly, so that the share share of the Olatone Group would have increased to over 75%. The new thing on the list is that MP Pension has moved up to become the next largest owner at the expense of the Folktrykksfondet. We have an exchange policy that has been the subject of revaluation in recent years, where we have increased the exchange rate from the company. We were also told at the General Assembly in Gårdslagen that we have listened to the shareholders' interests when it comes to exchange rates. We have defined an exchange policy, a careful exchange policy, which says that an annual exchange rate of 30-40% of the result is equivalent to the value of X. Yesterday, it was decided that the exchange rate for last year was 6.5 kroner per share. This results in 34% of the result, and according to the board's assessment, this is a balanced proposal, which balances the view of the shareholders with the view of the market and the credit side, where one sees it as very profitable to increase the exchange rate in a time when there is a lot of focus on the degree of reward. There was also a small adjustment in the management of the Joule-Aton Oil Company yesterday. Vår styreleder gjennom 40 år, kanskje Norges lengst fungerende styreleder, Ola Thun, han fyller 100 i neste måned. Han ønsket å være med i styret fortsatt med sin kompetanse og erfaring, og sine uvurderlige bidrag, med en nå som et ordinært styremedlem, og ønsket å se si fra seg ansvaret som styreleder, og da trådte konsernsjef Kjetil Nilsen entered the Olav Thorn group and took over the position. It is a broad, integrated board with a lot of good and varied experience. They are also shared with quite large stock exchanges. We have a female share of 60% in the board. We are also quite proud of that. Financial conditions. We have defined a financial policy and our key figures, which we measure every quarter, are still strong and give us a solid credit rating. We have an investment grade rating on BA2 with stable outlooks. The rating has been confirmed and renewed independently by MoDiS both in 2022 and 2023. We are now in a relatively small exclusive class of Nordic investors who have received both ratings and views independently in recent years. I would like to emphasize the degree of reward, which has remained unchanged from the change of year, despite the fact that we have made quite a large investment. The degree of interest coverage has also gone down due to increased interest rates, but far above the target. The liquidity reserve, in the same way, where we are The nearest target is the duration of the loan portfolio. We are at 3.1. We want to increase that now. I think we will be able to do that already next quarter. And we have now completed the ratio of non-pant-safety units, which is over 50%, and the pant-safety at the loan rate is going to be under 35%, and is far, far below. So, in summary, these key figures are strong. They contribute to keeping the rating, and we also have a fairly large margin for eventual change of the rating. We have financial indicators that consist both of the capital market and the banking market. There have been varying capital markets in 2022 and 2023. We will describe our access as satisfactory. We have dropped 56% of our yield in the capital market. If you include unused credit frames, the bank market is the largest, with 54%. We believe that a mix of 40-60% is reasonable. The banking market is much more stable than the capital market. The capital market has a tendency to suddenly collapse. It can be a little unbearable if you have large financial needs. Therefore, we are very concerned about having good relations with the large Nordic banks, something we think we have. Even though the market has been weak in the last 15 months, we have been able to extend obligations for almost 2 billion kroner, in the form of 8 obligations, with an average of 7.6 years in the short term, and then without PANT. We have then used the price windows that we have seen in the market and have been a bit opportunistic in relation to that. That has meant that we have liquidity reserves that in a very high degree exceed interest for the next 12 months. We think that is comfortable, and we actually have a fairly good margin of coverage of all interest in the bank and the IMF until February 2025. And the fact that we will not be able to renew any loans, either in the bank or the capital market, in 2023 and 2024, is very unlikely. But this is a curve that we naturally do not like, that our revenue increases. In the last five years, it has varied between 3% and 4.5% if we take it a little more roughly. During the quarter change, it was a little over 4.4%. If we look at this in relation to how the money market interest rate has increased, then they have increased by 3.5% and 3.25%, and our interest rate has increased by 1.37%. The reason for this is that we have a good part of the portfolio interest-bound, and we have several good interest rates We are relatively comfortable when it comes to the interest rate situation. What we do not have an opinion about is of course how the interest rates will It will develop in the future, and what we see there is that the interest market has a different understanding than what the macro-analytics and the Norwegian Bank have. So we're looking at the interest market, but we'll see how it goes. Sustainable value creation is important to us. We defined a new sustainability strategy last year. We established ourselves on an engaged level of ambition. This means that sustainability is the right and smart way to go. Our ambition is net zero emissions by 2050. The goal is to reduce emissions in the scope 1 and 2 by 60% by 2030. This strategy has set relevant goals for important areas until 2030. It defines clearly updated frameworks for sustainable energy work in the future. It includes, among other things, the BLIM certification of the shopping centres, where we have started and received results from several already. Here, the different pillars are linked to what sustainability goals they are linked to. I will not go through everything here, but it will be in the presentation that will be sent over to Oslo Børs. Vi har lagt frem en bærekraftsrapport som jeg anbefaler. Her er innholdsfortegnelsen. For de interesserte ser vi at her er det veldig mange interessante og aktuelle problemstillinger som blir omhandlet. Hvis du leser denne fra perm til perm, så kan jeg love deg at du blir ganske godt opplyst når det gjelder aktuelle og interessante bærekraftstemaer. Du finner den på olt.no. God lesning. Own portfolio, investments. Our biggest area is the shopping centre. If we include the shared centre, which I think is natural to do, we are Norway's leading shopping centre with a focus on the largest shopping centres. We now have 60 centres in Norway and Sweden, six of Norway's top ten, and in addition we own the sister company, the YOLA 2 network company, Norway's next largest, and manager number nine for external ownership. This means that we have in the group eight of the ten largest centres in Norway. The annual rental income at the shopping centers is about 3.1 billion, and compared to one year ago, the yield is up 0.4 percent from 5.28 to 5.68 percent. This is an overview that many of you are probably quite tired of. I never get tired of it, so you have to bear with it in the future. It shows the largest shopping center in Norway, and the orange is owned by the corporation. We see that our market position is further strengthened. There are not so many centers among the top 10 and also the top 20 that we do not control in Norway. We have a very good market position in the Norwegian shopping center market. Excuse me. If we then move on to the businesses that make up 1-22% of the portfolio, then we are a large, significant business sector, primarily in the Oslo area. We have often shown beautiful pictures of Tostrup Gård, Vika Atrium and so on. We have now wanted to show a little more of our diversity and show a central business that is owned by the companies. We have 60 businesses, trade offices, logistics and hotels, four rental homes and a rental income of SEK 800 million means that we are a medium-sized real estate company. Here, the yield has increased somewhat less than at the time of the shopping center and increased by 0.27% from the situation a year ago. If we split up the portfolio further, In terms of value, these shopping centres in the top 20 make up 43% of the total portfolio and more than half of the shopping centres. We also have a portfolio in Sweden that makes up 5%. And in terms of real estate, we have a varied portfolio, with offices, housing at 4%, we have logistics at 4%, we have 2% in hotels. So, in total, we have a real estate portfolio, including shareholding, of 63.5 billion. Yield development is what we get the most questions about at this time. Here is an overview that shows how the yield was at the change of year last year, at the beginning of 2021, and how it is now. We see that the total yield increase is a little over 0.3. and with a somewhat similar distribution on shopping centers and businesses. We can see from the table that in the first half of 2022, there was a very flat and partly decline in yield, but it turned in the second half of the year. If we look at how the idea is going to develop in the future, there are many who have opinions about that. Some macro-analytical analysts are quick to say that the idea is going to reach at least one percent point. It may be. We don't have a special understanding of this. We see that the yield has changed much less than the prognoses said a while ago. We have also calculated sensitivity. What if the yield changes by 1%? Then the property value will be reduced by 16%. This is the previous line. In this case, the exposed tax will be reduced. Our own capital will drop from 33 to 25.5 billion. Our own capital ratio will go from 51.7 to 47. And the loan rate, will increase to 41 percent, well within our own target, even if perhaps slightly above the highest level as we see it today. We believe that an increase of 1 percent overnight is quite unlikely, and if that were to happen, we would see that we would give quite The investment strategy is summarized in these beautiful words, acquisition, development, ownership. Primarily, it is property purchases and projects under implementation. In recent years, property projects under implementation have been on a low level, and we hope to be able to increase a little more, perhaps at the end of the year or by next year. In spite of that, we have invested around SEK 6 billion in the last six years, that is, around SEK 1 billion a year. And in the first quarter of this year, it looks almost crazy with a net investment of SEK 1.4 billion. It has never happened that Volatoren has stood for 10% of the turnover volume in the transaction market for real estate, but that has been the trend volume in the first quarter. I'm not sure what will happen in the next few quarters. Our biggest purchase was 50% of the Sørland Centre, which in the first quarter had a retail turnover of 600 million. the total income of 137,000 kroner. For those of you who follow the forecast, it is worth noting that from the first quarter, the company's balance and results have been consolidated into the consortium, while until the fourth quarter, was recorded under a joint controlled company, where only the company's net result and net capital entered into the results and the balance. This has contributed to a change in both our results and the balance. We have a small piece in Ulsteinvik, where we have taken over a shopping center of 12,000 square meters, which we have managed for several years. There is a store turnover of SEK 300 million and a rental income of SEK 14 million. We have several projects under planning. for all of them is that they are moving forward, but are partly affected by regulatory reasons, partly by cost reasons. But we hope and believe that the building costs will go down in the future, so that we can start new projects, at least in 2024. I think that will be possible. External framework conditions are something we are all exposed to. To conclude, I would like to talk about macroeconomy and equity. The prognoses from the Norwegian Bank are both positive and negative for our target. We show that the big downturn in the Norwegian economy has not happened, and that it certainly will not happen either. Employment is low, which is very positive for the shopping centres and the private sector. The annual wage growth is expected to go up quite a bit this year, 5.1%. There are signs that it might go above that as well. But they also see a fairly high annual wage growth in the next two or three years. This is positive for the shopping centre and private consumption. They see private consumption falling this year. We have not seen that coming, but that is what we are prepared for. We believe that our shopping centres will do well in the competition, because 35% of our revenue comes from the so-called necessary items, including the wine pool. But we do hope that the consumer price index will go down. The Norwegian Bank itself is tracking a 2.8 percent drop in 2024, and a further decline. There are a number of macro prognoses that are somewhat less optimistic than that, and still see a higher price rise for a longer period with higher interest rates. There, the currency courses have now come in and played a role as a joker. The housing prices are expected to go down 2.9 percent this year. This is definitely about the Oslo market, which is rising further, and a zero growth in 2024. And then an increase in the nearest years after that. In the same monetary policy report, the mantra is the need for higher interest rates in the Norwegian economy to reduce inflation. In the figure to the left, the top dotted line is the attack from March, while the blue line is from December. We see that in that report, at Norges Bank har oppbystert prognosen for styringsrenten. De sier også, her kommer jokeren inn, at dersom kronen blir svakere enn lagt i grund, kan det bli behov for en enda høyere rente. So, time will show. Vi er i hvert fall forberedt på en enda høyere rente, og tror vi skal leve godt med det også. We have seen some market updates, comments from Cushman and Wakefield, and if you look at the transaction market, you see that there are few transactions this far this year, we are at 10%, but many ongoing processes. Of course, increased interest rates, high inflation and lack of or more difficult access to banking finance create uncertainty in the future. On the office market, there is low office vacancy and a large rental price increase at quite high volumes. For other years in a row, there is a strong increase in office turnover. In trade, we see that retail is in a negative trend, while the purchasing sector is doing well. For the time being, the consumption was kept up on savings. It will be exciting to see how long you can use these savings. Last fall, the macroeconomists said that they were going to enjoy Christmas, so when we are over Christmas, they will reduce consumption significantly, because then the savings are gone. Now it turns out that there are still savings funds, and now people are just going to enjoy themselves in the holidays. They are going to travel and use the last savings funds before the day of judgment comes in another half year, so we'll see. But there is reason to believe that Ola Nordman, Ola and Kari will use less money out over the autumn, despite the fact that the salary will have proved to be quite good with around 5% plus. In terms of housing prices, we see that, surprisingly enough, not so much is affected by increased interest rates. This shows the underlying one question, since the housing price has increased by 3%, and the rental prices are increased by strong population growth, especially in the urban areas, and higher interest rates. In terms of logistics, there is a very good rental price increase, which reduces the decline in property values. If we then look at our future prospects in the observational mode, the Norwegian economy is now in a high condition, but there is a sign of lower growth. In order to reduce inflation, the Norwegian Bank has increased the interest rate by 3.25% over the course of one and a half year, and signals that the interest rate will continue to increase, whether it will go up to 3.5, 3.75, 4, that remains to be seen. And how long it will stay up remains to be seen. As I said, the macroeconomists, several of them, but we believe that there is higher for a longer period, while the interest markets price the interest rate already in 2024. Here one of the two forces will be right. There is uncertainty about the future of economic development. The Norwegian Bank expresses that there is greater uncertainty than normal, and I think we should pay attention to that. That is why we are in all humility and also unsure as to how the economic development will be in the future. What we can do with that is just to maintain a strong market position and a solid financial position. So we mean with that as a backdrop that we With the position we have, the degree of responsibility we have, there are still good opportunities for good results in the future. At the same time, we are well positioned to be able to benefit from possible investments, interesting investment opportunities that will arise in the future. And I think we will get more of that. That was what was on the agenda so far. If there are any questions, we can take them now.

Yes, we have received some questions. The first question is about where you borrow money and interest related to that. First of all, I would like to congratulate Olav Thorn Unification with a good administrative result in Q1 2023. And thank you for a good presentation by Erna Sperre. Når det gjelder gjelden i selskapet, er det ikke billigere å låne av bankene med pant i eiendommene først, i stedet for å låne i obligationsmarkedet, hvor renten vanligvis er høyere enn hos bankene.

The price in the bank market in relation to the capital market varies over time. We have never borrowed in the bond market if it is cheaper in the bank market. What we also see is that in the bond market we get access to loans without interest, while we get access to longer loans. So in today's situation, banks are much cheaper than the capital market. That is why we do very little in the capital market these days.

The next question is about stocks. The Olav Thun Group owns most of the stocks in OLT. It has also been suggested that there is a greater chance that the group will buy up more stocks than that they will sell down. Nå har OLT kjøpt opp egne aksjer i flere runder, betyr det at det er den måten Olav Tonggruppen vil kjøpe opp aksjer fra markedet og ta selskapet av børs. På den måten får aksjene rimelig alt så langt under reelle verdier. Det betyr jo at det er kun de som sitter som eier i OLT helt til slutt som vil få ut den riktige verdien av aksjene sine.

At the General Assembly yesterday, the full power to buy back own shares was renewed, so we have the opportunity to buy back 10% of the company's own shares. It will be up to the board to decide whether this should be done or not. When it comes to what the owner, the biggest owner, thinks about Olatone Ownership, I don't have any comment to that except that I know that the Olatone Group thinks that Olatone Ownership is a phenomenal, great company, and that that's why it's more likely, or less likely, that they will sell themselves in that company. Yes.

Neste spørsmål går på bærekraft. Som børsnotert selskap møter OLT nye rapporteringskrav innen bærekraft. Hvordan ligger Olav Thun eiendomsselskap an med tanke på først åpenhetsloven og EUs taksonomi?

We say that we are well prepared. We will issue a resolution on the arms law within the first of July, and we are also preparing the taxonomy report. So it is my impression that we are well prepared when it comes to those areas also within Bærekraft.

The last question is about rental revenues. Brutto rental revenues increased by 59 million towards Q4 2022 for the purchase segment. How much was driven by purchase and how much was driven by KPI adjustment of rental contracts?

I think we should get back to that question. If the media can send an e-mail to that, we will comment on that. Because I don't have the answer standing. If I were to suggest, it would be 50-50. But I will get back to that if I can get it on e-mail.

That was all the questions I wanted to ask.

If there are no more questions, I thank you for sitting in front of the screen and listening to this, instead of enjoying the sun, or watching warships, which some in the Oslo area find very interesting to do in these times. So I wish you all a wonderful day, and a really good Pinset every time it comes, and a beautiful spring, and a good summer. See you in August. Thank you for that.