Olav Thon Eiendomsselskap ASA

Hjertelig velkommen til denne gjennomgangen av første kvartalsrapport for Olatun Einarselskap. På denne vakre majdagen er det jo hyggelig at så mange har kommet frem foran skjermen, og vi ser at det er folk fra hele landet, inkludert Sverige, så vi ønsker alle hjertelig velkommen. Og til svenskene så kan vi jo nevne at dagen i dag er dagen før vår nasjonaldag, 17. mai, som i år er Da er 210 års jubileum for vår egen grunnlov. Så det var den lille historietimen. Vi håper jo at den presentasjonen kanskje kan være et brukbart forspill til den jättestore dagen i morgen. What we are going to talk about are the fixed positions, some main points from the quarter, share information, financing, interest development, sustainability, personal portfolio, macro and questions and answers. If there are any questions and answers, just send them in on the way, and after a short time it may be that we can answer some of them. Let's go over the main points. Vi må kunne si at vi har lag frem et godt resultat. Med et godt operativt resultat og en stabil verdiutvikling på egneporteføljen, så kunne vi presentere det høyeste resultatet før skatt på nesten to år siden 2. kvartal 2022. Resultatet før skatt var utrolig. Welcome to this edition of the first quarter's report for Olatun University. On this beautiful May day, it's nice that so many have come forward in front of the screen. We see that there are people from all over the country, including Sweden. We wish you all a warm welcome to the Swedish University. We can mention that today is the day before our national day, May 17th, which this year is the 210th anniversary of our own constitution. So that was the little history hour. We hope that this presentation can be a usable example of the great day tomorrow. What we are going to talk about are the fixed positions, some main points from the quarter, share information, financing, interest development, sustainability, portfolio, macro and questions and answers. If there are any questions and answers, just send them in along the way, and if necessary, we can answer some of them. Let's go over the main points. We must be able to say that we have produced a good result. With a good operational result and a stable value development on the property portfolio, we could present the highest result before tax in almost two years, since Q2 2022. The result before tax was increased to 814 million kroner. The value changes in this quarter were 257 million plus. So the concept of result is what we focus most on. In any case, we have done it when we have had to write it down in our portfolio. The result before tax, value changes and currency, as we see in relation to the same period last year, is quite stable at 562 million kroner. We have a solid financial foundation. The income share increased to 51%, the loan rate was reduced to 36%, and the liquidity reserve increased by 2.5 billion from the change of year and 3 billion from the same period last year to 7.5 billion. The share exchange rate has had a very pleasant development in the first quarter and has risen by 19%. In addition, we see that the retail turnover in the shopping centres has increased by almost 5% from the first quarter of 2023, that is, well above the price drop of around 4%. We also see that the number of visitors is increasing, so that is something we are happy about. The main figures. I'm not going to go into all the elements here, just to point out the ones that are yellowed out. We see that in relation to the previous quarter, here is the comparison of the previous quarter to see the development, not necessarily as we expected it to be the same quarter as last year. We see that there is an increase in both rental income, result before taxes, valuation and currency. The decline in the loan rate and the interest rate, which there is a lot of activity around the market, has remained at a level that is high and comfortable. And the liquidity reserves have increased to 7.5 billion. If we then take on some longer glasses and look at how the last four years have developed, we must be able to say that we have delivered stable, good operating results through different market conditions since 2020. The table on the right shows that the rental growth reduces the effect of high interest rates. In the first quarter of 2022, when Norges Bank had just started with interest rates, we increased our interest rates by 1%. 117 million kroner, while net rental income has increased by 147. That means that we are sitting again with more on the bottom line than we did two years ago. Then I will go over to share information, and we will show you a picture of the prospect from 1983. I will not go through every single year since 1983. But we will show some trends. Here is a picture of our former board member, Olav Thun, who already in 1983 was a man of 60 years, but has achieved a lot after that as well. We start with 2024. The drop in the first quarter is 19%, as I have mentioned. If you look at the last 12 months, we have had a drop in the share at 37%, which is a combination of growth and exchange rate. The exchange rate has increased by 3.6 billion. We have received 400 new shareholders in the first quarter, and we now have 4,200 shareholders. And it is the foreigners who now come into the company in an increased degree, and now account for 4% of the shareholders. Vi har blitt hevdet å være Børsens kjipeste aksjer, og det stemmer sikkert, og de er sikkert også den kjipeste finansdirektøren. Men vi har gått fornøyd med utviklingen uansett, med en årlig avkastning på 12-13%. Vi har kunnet vise 40 år med overskudd før verdijustering av eiendomsporteføljen. And we have also been told, and it has been quoted in the press, that since 1997, Olav 2.0 has given the shareholders the best discount of the companies that are still listed in Oslo. So to get a market cap like KIP in this context is perhaps not particularly negative. If we look a little more in detail at the share price development in the last five years, we can see that the share price has been divided into different periods. We can see that in all periods, the share price has been higher than the main index on the Oslo Stock Exchange. We are quite pleased with that when we look at the framework conditions we have had since 2019. With the sticker below, there are framework conditions that we see as very favorable for a company that has 75% of the shares in the shopping center, namely with the shopping center dead, focus on net trading, pandemic, which was not positive for anyone who did customer-oriented activities. Inflation and inflation and expensive time, and now when we finally could breathe, everything was done, now it's going to heaven, we got the most powerful interest rates in several decades. In spite of this, we have had a fine development in the stock exchange rate, and we put a lot of value on that. We believe the reason for this is that we have defined an exchange policy that is stable and that we deliver year after year. Where we have defined an annual exchange rate of 30-40% of the result, x value changes. And as an auctioneer, you have to be happy with that, because had we taken the result before the tax, including the valuation, we would have had to cut out the exchange rate from last year. We did the opposite, increased it to 7 kroner. That was decided on a company-ordinary basis. General assembly in gård. Det utgjør 36% av resultatet. Vi mener at det er et utbytte som balanserer både hensynet til aksjonærenes ønske om utbytte med kreditmarkedets ønske om å opprettholde gode kredittall, nøkkeltall. Vi tror faktisk at vi er blant de ytterst få eiendomsforskapene i Norden som har kunnet opprettholde og øke utbytte i 2023. We will move on to financing and interest rate development. It has become a popular sport to find out how interest rates will develop in the future. That is at least the impression you get if you read in the press. We will start with our financial key figures. Summing up, we have stable and strong key figures that defend our solid investment grade rating on BA2 with stable outlooks. We have been through some of this earlier, so I will go through this quickly. It has been unchanged since February 2021, and As it appears in the table, we are still very low on the loan rate unit, actually reduced. The interest rate is also very comfortable at 3.0. And we also have significant liquidity reserves. If we then look at how the interest rate has developed over various periods of time, it is an interesting topic that I could spend a lot of time on. It is interesting to see the development from June 2021. That was before the Norwegian Bank began to increase interest rates from zero. After that, the interest rate has increased by 4.5%, 9% corresponding. Our residual interest rate has increased by over 2% and is now almost 5.2%. The reason why we have not received a higher interest rate increase is the fixed interest rate share, which at the beginning of March was 59%. We have always been concerned about having solid liquidity reserves. They are very comfortable per 1.33. What we see is that we have a decline in the capital markets for the next three years, out 2026 at 5 billion. In the banking market, we have 3.7. So the total decline in capital and the banking market is 8.8 billion, almost. And we are almost to the extent of the liquidity level already today to cover these. It is of course a completely utopian situation that we are not going to make new loans, and we already have in In 2024, long-term loan rates in the bank market reached 4 billion, and in the bond market over 1 billion. And these markets are still very attractive. We experience and have very good access to financing, both in the bank and the capital market. During the quarter change, we had cut 65% of the yield in the capital market and 35% in the bank market. If you include the unused credit frames, the mix is about 50-50. We think it's very attractive to have good bank relations, despite the fact that the capital market is currently far more competitive than the bank market, both in terms of conditions and establishment speed. That's what you have to be able to say. We have an example of financing in the capital market that is quite new. Last week we released a new obligation loan in Swedish kroner, a two-year fixed interest, insured in Swedish kroner, taken up in Sweden. It was raised to a fixed interest rate of two years at 4.05. Interestingly enough, we did a completely similar, completely parallel loan intake in September. Then we achieved a fixed interest rate of 5.67. So that means that we have received a new loan, a rent decrease of 1.6% in the last half year. So for our part, it is not necessarily higher for longer, even smaller for a shorter time, or whatever you want to call it. In any case, we have had a good increase in interest through margin decreases and through interest decreases in fixed interest periods. Sustainability is something we both work a lot with and are very focused on. Vi har et ambitionsnivå som er engasjert. Hovedelementene er at vår ambition er nett og null utslipp i 2050. Delmål er å redusere utslippskåp 1 og 2 60% innen 2030. Strategien har definert relevante mål for veselige områder frem til 2030. Den strategien definerer oppdaterte tydelige rammer for bærekraftsarbeidet fremover. Status now at the change of year. I have shown this figure before. I do not intend to go into this in detail. I see that some of it has been reduced to 2024. That goes to... To define science-based targets for our own emissions, we set a baseline. Scope 3, which we have set to 2024, and also to map the potential for the use of recycled materials in construction projects, which we have set to 2024. Other goals for 2023 we have only ticked as upfilled. I can assure you that there is a lot of interesting health care information in our health care report, which is available on olt.no. Here is the content of the report, with detailed content on health care work, climate, nature, circular solutions, social safety, and also an article by FN Global Compact. And... If you read through this well and still have questions, it is only natural to contact me or the business department, so we will probably be able to give you good answers. Then we will move on to what we live off, namely the property portfolio and investments. And at the beginning of the first quarter, the property portfolio included our shares in joint controlled and private companies, a little over 60 billion. 75% is made up of shopping centers and 25% of other business units. What we see is that our focus is within the largest shopping centers with 30% of our entire portfolio, and shopping centers within the top 10. We are definitely in a class in Norway that we will also come back to. This is how the yield development has been the last four years. divided by the segments, where we see that after the beginning in the first half of 2022, the yield development has changed. The yield has changed by about 1.1. I am still thinking back to a presentation for I think it was at least in 2022 that we had a scenario in the presentation that showed how the value change would be with a yield change of 1%. We called it a worst case scenario. I got a reply afterwards from one of Norway's sharpest analysts, who pointed out that for them 1% yield change was a base scenario. So the host has been right, but we have fortunately had a levy increase, which means that the value change has been much less than the yield increase would suggest. Here is an overview that shows it, where we see that the total value change on the portfolio from 30.622 is 6.4 billion, that is, a decrease of 10%. And that the rent growth in the same period has reduced the value drop by about 4.5 billion. So if we had unchanged rents, the value change would have been 11 billion, so it is now significantly reduced due to rent growth. We are very happy about that and thank all the good employees within the various unit departments who have contributed well to rent growth. The shopping center unit is our largest segment. Det er vel ikke alt for frekt å kalle oss Norges ledende kjøpsenteraktør, med tyngdepunkt på de største sentrene. Vi har 60 kjøpsentere. Vi er mer opptatt av størrelse enn antall på kjøpsentere. Vi er allikevel i stand til å telle opp at vi nå har 60 stykker. Markedsverdien er på 45 milliarder. And in total, it was 46.4% by 2036. But the market value includes the centre, which was bought in 2023 for 1.3%. So we see that there has been a real market value decline in the centres. But we also see that the rental income is higher than it was in 2036-2022. We have the same assets, we earn more money from them, higher rents, but they are much lower in market value. We have a focus point, as mentioned, among the largest shopping centres, six of ten. Six of Norway's top ten are in our portfolio, and that makes up 40% of the purchase value. The value is increased by 1.1% from 36.22. We believe that the yield is 6.4% on the entire portfolio, and we hope that this is careful enough. It's not like we're sitting and calculating this on our own. We take a look at external value assessments. So it's the market that decides which values we put in our balance. But we hope that we are now close to the top. on the top of the island, so that it will go the opposite way in the future. This overview, we know that some of our competitors hate it, so I will try to give all the information and not knead it in, but it shows with quite a lot of clarity what a good market position we have among the largest shopping centers. We also see that Norway's 25 largest shopping centres have a weaker revenue development than what we have in our centres in total. Our business is also quite large, with assets of around 15 billion, so we are an important player in the Oslo area. The rental income level is 840 million kroner, also increased from 36.22, where we also increased the yield by 1 percentage point. Remember, when it comes to the yield here, that we have 400 rented houses, which normally have a lower yield than the other business units as well. The investment strategy was defined in a prospect from 1983, with the acquisition of developed property, and is still very significant for what we want to do, namely to buy property with development potentials. develop them and keep them in the main case. Looking back from 1983, we think it has been a good strategy to stick to the values we have in our balance. Vi har investert de siste seks årene rundt 8 milliarder, og i første kvartal var det kun 183 milliarder kroner. Det er jo et veldig beskjent beløp. Det er jo fordi vi nå ikke har kommet i gang med noen store nye prosjekter, eller har kommet i mål med noen nye eiendomskjøp i kvartalet. We hope that this can change throughout the year. In the meantime, we are looking forward to the fact that we have paid off the debt with around 500 million kroner and improved our interest rates and made us even better prepared to be able to make good investments in the future. We have some projects that are in production. Lagunen Storkenter is being expanded. We have a small town in Oslo. We have a shopping center on Anfi in Elverum. There we have, as you can see, an ownership rate of 540%, and that is not a lie. So it will probably be corrected before the version that is released, but it is a 50% ownership rate. It is distributed with 4,500 square meters. Vi har noen prosjekter som vi håper og tror vil bli igangsatt i 2024, nemlig fornyelse av kjøpesenteret i Moss. Vi har boligprosjekter i Moss og Asker. Der vil vi igangsette... sales already before the summer, after the plan, and the pre-sales will show if there are foundations to start. We also have a small new building and rehabilitation of Sandens shopping center in Kristiansand. In addition, we have several projects under planning. For example, the Gunneriskvartalet, which is perhaps the project we have talked about, but have not started. I will not comment on that now, but refer to olt.no for more information. There are many who believe in power, and some are very sure, others are more unsure. We are among the more humble part of the market, and a little unsure of where it will move forward, in the same way as Norway's bank, for the rest. I would like to focus on a few numbers from here, which are positive for us as a company, namely the unemployment rate and the annual wage growth. As we see in 2024 and beyond, the unemployment rate, these are the prognoses from Norges Bank, this is from March, will be low in the future, increase marginally, but the unemployment rate of 2.3% is, from a historical perspective, very low. The annual interest rate growth at 4.9 after 5.2 last year is also high. We see that we are already over 4.9, so it should be 5.2 also this year. We continue to see that the housing prices, After that, zero growth in 2023 will grow further in 2024 and rise markedly over the coming years. This is a consequence of the fact that private consumption or private economy will be strengthened, while housing investments are low. So the demand for housing is constantly low, and then the housing prices will rise further. When it comes to the interest rate itself, the Norwegian Bank says in May that the government interest rate will probably remain unchanged for a good while in the future. They state that the prognosis indicates an interest rate of 4.5%, as I said, a good time in the future. It is a mild term, what is a good time? If you ask a child to wait for an ice cream, it is a good time, it is at least not a year. But if you ask a macroeconomist, it is perhaps a good time, it can perhaps be one or two years. Marketer priser vel i en renteøkning, rentekutt, tidligst mot slutten av året. Norges Bank uttaler også at det er usikkerhet om de økonomiske utsiktene. Det synes jeg er vel verdt å legge vekt på når Norges Bank sier det. They also claim that if it is necessary to raise the interest rate to reduce the price growth, they will do so. This does not mean that the interest rate will increase. And they also say on the opposite side, if the economy is rapidly slowing down, or inflation falls faster than expected, the interest rate can be lowered earlier than expected. Yes, I think there are all kinds of reasons to expect that the Norwegian Bank will deliver a trend on this, perhaps offset the interest rate cut to December. Men det kan naturligvis godt være at det skyves over til neste år. Vi synes ikke det er noe i dette som tilsier at de skal øke renten videre. Tror seg ansynligheten for det er ganske lav. Hvis vi da skal oppsummere dette, så har vi sett at veksten i norsk økonomi avslutter. and we are still at a fairly low level. BPI grew by 0.2% in the first quarter. Despite this, employment is low. Prices are falling, but not fast enough, perhaps. They are still at the top of Norway's bank's inflation target. Food is probably the biggest wolf there. Vi antar at Norge mest sannsynlig er på rentetoppen, men vi er godt forberedt på at renten skal bli holdt uendrett god stund fremover. Vi er positive til vårt operativt resultat, og at det er opprettholdt på et solidt nivå på tross av at vi har hatt en betydelig renteøkning. We have good faith that our solid operational results will be able to continue in the future, due to a solid market position and our strong financial position. Last but not least, we believe that good result development, low interest rates and high liquidity reserves give Ola and Nærsjøske good opportunities to take advantage of investment opportunities that will arise in the future. Then we went over to the possible questions that have come in.

Yes, there have been a few questions, so we can start with them. Can you describe how equality and upgrading are done with regard to CAPEX or OPEX for shopping centers and office units?

We can do that for sure, but not right now. We can come back to that. If you can send an e-mail, we will get that specified.

We can do that. The second question is this. What is your view of the difference in yield requirements for your shopping center versus your office?

Good question. I would say that, as I mentioned, our values are in the form of the average from two external value assessment experts. There is a big difference, and it is the case that the purchase center ownership never came down to the low level that the business ownership was. There is probably still a greater demand for business ownership in the big cities than for the purchase center. In addition, housing ownership is in our business ownership part, That explains some of the differences. But the development in the segments has largely been the same.

Great. That was actually the question. So then you just wish everyone a good 17th of May and Pilsen.

Yes, we absolutely do. And allow me to remind you of the next webcast, which will take place on the 15th of August. Same channel. And then I just want to say thank you for me and wish you all a really good May 17th and a good summer. I hope it will be as good as it started. So good luck and I'll see you in a few months. Thank you.