Olav Thon Eiendomsselskap ASA

A warm welcome to this episode of the third quarter's presentation for Ola Thun Ownership. I have to say that the quarter, as a whole, is a bit in line with the weather we had on the way to the studio today. Relatively grey, dark, with downpours, but in line with what we saw in the horizon, here it is dimly lit, and we have faith in better times. I'll get back to that in a moment. And we had good clothes on, so we could bear the weather well. We will talk about the third quarter, stock information, financing, sustainability, the equity portfolio, and a little bit about the macro and the equity market. Basically the fixed positions that we usually have every quarter. In short, in the third quarter, we have become very fond of the term operative results. We think it is exceptional. I have to say that it is a solid operative result, but the decline in value on the N-sport portfolio, Increased interest rates are a sign of a bookmarked undercut in the third quarter. This means that we have a net profit of 763 million kroner, down from 48 million kroner a year ago, while the valuation of the property portfolio, including the company and joint controlled business, was a little over 1.3 billion kroner last year, against 400 million kroner. If I look at the result concept, which we have become so fond of, it shows a surplus of NOK 540 million against NOK 518 million last year. The company has a solid financial foundation. The net capital share was 51% and the loan rate, even after the declines in the GABA-NC portfolio, was 36%. The liquidity reserve is at a little over NOK 5 billion, and I will come back to that later. The claim is that there has been a fairly stable development in the stock exchange rate, with a drop of 1%. What has not been stable is the stock exchange rate in the shopping centers, which continues to increase, with around 7% both in the quarter and so far this year. We are quite pleased with that, and that is slightly above the KPI. If we then go a little more concretely into the main figures, I will of course not go into every single figure here, then you might want to fall asleep in front of the PC. But let me focus on the most important, the gross rental income, both in the quarter and in the year, has increased by around 17%. If we divide it up in rental growth on properties that were bought in 2023, at the start of 2023, it was 145 million kroner, while rental growth per third quarter in properties we owned at the beginning of this year was 215 million kroner, which is a growth of around 10.5%. I have to say that we are very pleased with this. We were aware of the results before the tax value changes were announced. If we then look at the result at 39% compared to last year, we had an increase of 4%, so we managed to increase the result despite increased financial costs. The loan rate has increased somewhat, from 34 to 36 percent. We were still high in the Scandinavian championship with a low loan rate, and the interest rate, which we know that many are concerned about. We have reduced it somewhat, but down to 3.3%, and it is comfortable in relation to all possible rating matrices and key number expectations. We were in on the liquidity reserves, and the share price was 165 kroner, while the substance value was 364 kroner, so it is still a reasonable share. If we then look at it through a three-year period, which has been quite special for us, then we must be able to conclude that we have had stable, good operating results through different market conditions in the last three years. And the interest growth reduces the effect of the strong interest increases. In the table, we show that. If we compare it with the third quarter of 2021, when the interest rate was sweet and low, around 0%, the interest rate costs have now increased. With 230 million kroner from 500 to 740, while our rental income has increased almost twice that. And the result before the tax changes and the sales profit, which we think is right to take out for the sake of the collection, increased significantly from 2021. Then I will go over to share information, and it is the case that we celebrate the 40th anniversary as a listed company this year. This does not mean that we have champagne at the office every single day, but we still think that it is nice to wander around the 40th anniversary as a listed company. And P&T is a stock value of 16.7 billion. We have 3,700 shareholders from 15 countries. 98% of them are Norwegian. If you look at the development during the 40-year period, the share has given a yearly return of 12-13%, 40 years of surplus before value adjustment. It has been written that since 1997, Ola 2 has given the shareholders the 5th best return of all companies that are still listed in Oslo. And it is known that many of the companies that existed in 1997 are no longer listed for various reasons. This is the share price development and the shareholder overview. We see that we have had a completely OK development, both this year and the last 24 months, the last two years. We are weaker than Oslo Børs, and that applies to the last three and five-year period as well, even though the rejection is nothing to be ashamed of. I think it is reasonable, and when you consider good or bad there in Oslo and Børs. Remember the backlash we've had since 2018, where it started with the death of shopping centres in the US. The net trade to the heavens was there for a few years since the death of shopping centres in Norway. When we managed to counteract that, the pandemic came and we had to close down. When we managed to break it down, with quite good results, the turnover increased because people were allowed to travel abroad, among other things. In addition to saving money by not going out and spending money on the city, the shopping centers developed well during the pandemic. So, when we then pulled the trigger and thought, now there are no clouds in the sky, then the highest interest rate will come in several decades. So in light of that, we think that the stock exchange rate development has held up reasonably well, something that must also be said in relation to some Scandinavian peers. The shareholder survey is quite clear. The largest shareholder, the Orlaton Group, is at 75 percent. Otherwise, there have been no major changes in the shareholder list in the past year. You may have noticed that the Folktrygd Fund has dropped somewhat, while the Nordea Value Paper Fund has increased somewhat, along with G.P. Morgan. But in general, relatively unchanged, I would say. Let's look at what we get a lot of questions about and spend a lot of time on, namely financing and interest rate development. This is an overview of the key figures in our financial policy. We see that stable and strong key figures give us a solid rating. We have an investment grade rating of BA2, with a triple B, with stable outlooks. It was renewed in April, with unchanged status. We have never experienced a change in rating or outlooks, and Scandinavia is also on that in a smaller number. I would also like to emphasize the interest rate, which is at 3.3, far above our target. The loan rate, which is also relatively low, at 36%, far below the target. I would say that today, More than a guideline that we should not exceed 40 to 45, but the target is 45 to 50. We see that the duration on the loan portfolio is increasing, and we are very pleased with that. All in all, we think that we score quite well on the key figures that we have defined that we will measure on. The sources of financing are still both the bank and the capital market. If we look at the short-term yield, the capital market accounts for 55%, while if we look at the unused credit frame, which is reasonably in the bank market, it accounts for a little under half, 45%. We would say that the access to financing in the capital market and the bank market has been satisfactory in 2023. with varying conditions. We have used the windows that have been in the capital market to establish new loans, and one of the windows was, as we considered it, towards the end of Q3, the beginning of Q4, where we have issued an obligation loan of about 1.25 billion, with conditions that were lower than we thought a few weeks before. So we are very pleased with that. We are quite concerned about keeping our liquidity reserves at a high level, and with over 5.2 billion, we have more than enough to cover all withdrawals up to 2025. We renew them in the course of time, and we have very rarely experienced that we do not get renewed loans that decline, but nevertheless we have enough to cover up to 2025. And we are already in good dialogue and have received good indications on credit frames that fall in 2025. So we will probably refinance that either in Q4 or in Q1 2024. So we experience the dialogue with credit institutions that is very positive for the time being, and we put a lot of emphasis on that. This graph shows a slightly lower price, but that is how it is. Our interest rate has increased to 5.1. It has increased by a little less than 2 percent since the start of the Norwegian Bank. The Norwegian Bank has increased by 4.25 percent. Our three-month interest rate has increased by 4.5 percent. This is a development that at least we had not foreseen. There are not many others who would have foreseen that it would be so fast and so high. It is just to read the Norwegian Bank's reports a year ago. We have also been surprised by the scope of this, but we live well with it. Sustainability is something that we work a lot with, use a lot of resources, and this is our sustainability strategy, briefly summarized. I think we should spend a little less time on it now. We have spent a lot of time on it so far. Just briefly mention that the goal for 2030 is to reduce emissions by up to 1.2%, with 60%. That is our goal. We also have a goal that 100% of the renovation will be in relation to the taxonomy. We have an ambition to have net zero emissions by 2050. All of this is on the table, and it is being worked on well and intensively in the organization to achieve not only the goals for 2030, but also the shared goals that we have for 2023, 2025, etc. And to the right you can see which maintenance class goals our goals support. So this is on its way. The property portfolio and investments are basically the properties we live off. This is an overview of the property portfolio divided into segments. I'm not going to go into the simplicity of this, I'm just concluding that our main segment is the shopping centre within the top 10 and top 20 in Norway. They make up 41% of the portfolio, is between 60 and 70 percent of the shopping center portfolio. 74 percent of the total portfolio is a shopping center property. We have other property, or business property, that is not a shopping center. We have offices, homes, trade, logistics, is 15.9 billion, which is 26%. In total, the account portfolio, including our ownership shares in the joint-controlled business and the associated company, is 61.5 billion. This is the yield development that we are asked about. How has it been since 2019? Here is the answer. If we look at how it has developed from Last summer, June 30, 2022, it was the lowest, with the highest values. Since then, our yields have increased by almost 0.8%. It was not an increase that we thought we would have in June 30, 2022, but we have to admit that we have handled it reasonably well. This is the value change split segment, where we see that from June 30, 2022, the value change on the property portfolio is 4.5 milliarder, or about 7%. And as mentioned, in the same period, the cost reduction requirement, the net yield, has increased by 0.79%. What is coincidental is that the rental growth in the same period has significantly reduced the value drop, between 3 and 4 billion kroner. If we had unchanged rental income, then the value drop would have been perhaps up to 8 to 9 billion kroner. So we are also well aware of that. The purchase center value, 73 percent, of the balance included in the shared rental centre. We have 60 centres where the market value is 45.6 billion. A year ago it was 46.2 billion, but the rental income level has increased. We have 6 of Norway's top 10. We can see here that the yield has increased from 5.27 to 6.06 on our purchase center units. That is higher than it has been for a long time. What is interesting to see is that we have the same purchase centers plus two new ones, or one and a half new ones to be precise. We see that we get higher rental revenues on the units. but they are slightly lower in market value. And it is not the case that when the market value falls, that units disappear out of the balance. No, we have the same units, but we just have a slightly higher income on them. So it is worth noting. This one I know many like. I know that many are starting to get tired of it, so I'm going to be a bit quick on it. Just to show that we have good revenue development at our top 10 centers, where we have a revenue development compared to last year at 5.2%, while the rest within the top 10 is down to 1.7%. Yes. The part of the business owners who do not have a shopping centre. With a value of 15.9 million, we are a relatively large business owner. We mostly live in the Oslo area. Here we can also see that the point is quite well illustrated, that the rental income level has increased. In the properties we have, the rental income is higher than it was a year ago, but the market value is lower. We can also see here that the yield has increased from below 4 to 4.66. Our investment strategy is summarized in these iconic words, acquisition, development and ownership. It shows that we buy properties primarily those with potential for development. And we like to keep the properties we have. We do not sell them to pay off the debt. That is why we have collected this in the term ownership. We have invested around 6 billion in the last five years. The average annual income is 1.8 billion kroner per Q3. We have been talking about what we have bought this year. The largest is the Sørland Center, where we took over the last half of the project. We have also bought a smaller shopping center in Møre and Romsdal, Amfi Ulsteinvik. Both of these are developing well. We have projects that are under implementation and planning. Of the new projects that we want to start in 2024, the expansion of Lagunens Storsenter in Bergen is among other things, and an upgrade of our shopping centre in Moss. We have a long list of projects that are under planning, but we have to wait for the implementation, based on market conditions and regulations. Then we will move on to the macro. It is quite exciting in our days. These are the forecasts from Norges Bank from September. I have chosen to focus on two key figures that are important for our business and for the shopping centres. The unemployment rate, as we can see, will increase from 2.2 to 2.4. But for those of us who have lived for a few years, this is a very low unemployment rate anyway. It can be seen as a full-time job. People keep working, and that is positive. We also see that the annual wage growth this year has been high, as it was last year, and will be quite high in 2025 as well. And that is positive for people's ability to pay for housing loans and manage their obligations. And then it may be that there is again a little slack to trade at the shopping centers. Christmas shopping now becomes interesting and exciting. It is of great importance, not only because This month means a lot for our rental revenues as well, because the stores build up reserves for next year through Christmas trade. I saw that Virke has quite optimistic prognoses for Christmas trade in the coming year, so that was good. I'm not going to say much more about this. The interest rate is of course exciting. For our part, It is not very important whether Norges Bank increases the interest rate once again or not. It is not make or break. What we are quite sure of is that we are approaching the interest rate peak or are on the interest rate peak. What Norges Bank expressed in November at the interim meeting was that they probably will raise the interest rate once again in December. They are open to keeping the interest rate in peace, as long as we are sure that the price growth is on the way down. Those of you who are very concerned about whether there will be an increase in interest rates or not, I recommend that you sit at the PC at 08.00 in the morning, follow the Central Bureau of Statistics on the price figures. That can give us quite important signals. What I like less than when they put it up again is The formulation is that there is a great need to keep the interest rate up for a good period of time in the future. Of course, you don't know what they mean by a good period of time. The market price is in the interest rate cut already until next year. But now it has come to an X-factor, a joker in the picture in the form of a weak crown, which may be a bit of a problem. So we hope that the crown will not falter again, at least. If we look at the market for energy, we have borrowed some plans from your last market overview. The transaction market is much lower than it was last year. This year it was 38 billion, against 80 billion last year. In many cases, sellers want to sell at last year's prices, while buyers want to sell at next year's prices. There is still a gap between buyers and sellers, even though we see that there are now a large number of units that are out in the market at prices that are beginning to become very interesting and marketable, as we consider it. We see that the prime yield has gone up further. And then there is a point they point out here, as we also see, that high financial costs and the need to strengthen liquidity will probably trigger more transactions in the future. Coming back to it, we are probably in a high degree on the buyer's side and not on the seller's side. To sum up, the growth in the Norwegian economy has decreased. It is almost at zero, but the unemployment rate is still very low. The price growth is decisive, but it is still higher than the Norwegian Bank's inflation target. We are also a bit excited about the price growth that will come tomorrow, because our rental regulation will be linked to the October consumer price indexes. Last year, we were very successful in getting our rental revenues regulated. As I said, we are close to the top of the interest rate, but it is signalled that the interest rate will remain at a high level for a good period of time in the future. We are very pleased that our operating result is maintained at a high level in spite of these strong interest increases. And in spite of the fact that we have to be able to view the times as uncertain, we expect that the market position and our special financial position will be able to contribute to good operational results also in the future. So low interest rates and higher credit reserves give us very good opportunities to make use of interesting investment opportunities that have emerged and will emerge in the future. We look forward to the rest of the year and out in the winter. We think many interesting things can happen. Then we were done with the question round. So if I got any questions,

Yes, and today is actually the first time I've experienced that, that we haven't received any questions. That means that you and Arne have held a very, very good presentation. But we are available otherwise, if there were any questions afterwards, then just contact us.

Absolutt. Da er det vel egentlig bare å si takk for meg og minne om at dere må skru på neste webkast som er 16. februar klokken 10. Da presenterer vi rapporten for fjerde kvartal. Med det så benytter jeg anledning til å ønske alle en vakker førhjulstid og et riktig godt nytt år. Takk.