Olav Thon Eiendomsselskap ASA

Welcome to this presentation of the half-year report, the second quarter report for the OLA-2 company. It's nice that so many have lined up in front of the PC to attend this session. We know that we are in a tough competition with the Norge Bank Live at 10 o'clock and the press conference at 10.30. But we also have an interesting presentation to go through. The points are the usual. We go through the quarter, the main numbers for the quarter and the half-year, the stock information, financing, storage, property support, macro and finally we have the question round. If there are any questions, just send them in, they will be answered at the end of the session. In short, there was another report about the trend of summer weather in Norway, July weather, namely We have varied with some negative days, other positive days, such as the sun. I hope to be able to get a better picture of what we have been able to present in the last quarters. That is why we use the adjunctive additives and not solid, heavy, good and so on. We believe that it is on the even. The transfer is a different result, but the value increase on the N-portfolio then reduces the surplus. The result before the tax was 286 million kroner. The real stock did not increase quite as much as last year, but if we look at the result before the tax, and if we look at the value increase over the currency, then it is something back from last year, and that is explained by the development of the tax. All value changes were 254 million kroner negative against 400 last year. We have a solid financial foundation, despite the exchange with 700 million kroner The total capital share was reduced to 50% and the tax rate was increased to 37%. The liquidity reserve is also increased considerably from 4.9 to 7.8 billion and comes back to it. We also have a very good stock exchange development in the first quarter, still in the second quarter, with a somewhat different tempo, but a total of 4% in the quarter. The shopping malls increase the stock exchange sales, which also makes the visits in the quarter. We had an increase of .1% compared to the second quarter last year, and if you look at half a year below, we have an increase of 9%. We are quite happy with the fact that most people notice increased interest rates, which has a significant impact on the stock exchange. Here is a table that shows some main numbers from the second quarter and the first half of the year. We have shown the corresponding numbers for the first quarter in column number three on the left. We will only deal with a few numbers here. We would like to show the gross borrowings for the first half of the year, if there is an increase from 4 years to 3%, and if we correct the Sølla Centre, which we are talking about in the report, it was an organic borrowings of 3.6%. I would not call it good, but I would not call it bad either. So I would say it is a little in the middle of three, maybe a little on the weak side. What we see a little further down is the interest rates. In comparison to the same period in the first half of the year, the interest rates increased by 64 million kroner. But if we go a little to the left in the table, we see that in the second quarter we had almost 10 million lower interest rates than in the first quarter. So it is possible to hope that the interest rate is reached. We actually think it is. So I will come back to that. The rate of borrowings is, as I have been saying, 37%. The rate of borrowings, 12 months in a row, is at .9% for the first half of the year. That is far beyond our own target, but some weaker than 2023. The liquidity reserves have also increased in Q2 and are, for sure, coming forward for various reasons. The unit capital is then down to 30.6 billion. The value of the substance has also dropped compared to a year ago. The stock exchange rate has increased from 168 to 224 last year. So the stock, which was very cheap a year ago, is still cheap, but a little less reasonable. One might say that it has become relatively expensive in the last year, but there is still a very good decline in the value of the substance. Operative results are now a term that we are fond of. And we see that in the last four years, apart from one quarter of the pandemic, we have been at a good value between 5 and 600 million kroner. We show in the table, the first half of 2024 compared to 2022, we see that the interest rate has increased by 196 million kroner, the loan revenues by 312 million, so the result before the tax is somewhat reduced by 65 million kroner, but is still well over 1 billion. If you look at the bottom graph, it is a value of substance per share. We see now, after we have adjusted the value of the property in a range we did not think we would do two years ago, still has value of substance per share, which is the same value at the beginning of 2021. The stock information. It is nice to be able to show the stock exchange rate against the index in the last 12 months. We see that Ola II has had a stock exchange rate development at 38% while Oslo Börs has a much lower rate. This is true for all periods we have set up in the table. We are pleased that there has been a certain repricing of stocks in the Ola II property. When it comes to the largest shareholders, there is little change there. Last year there was more on the margins. The largest owners increase the share, because their own shares are eliminated. Apart from that, there are no big changes. The exchange policy is fixed. We have said that we will give a careful exchange of -40% of the result. We therefore shared 7 kroner in May, and that made 36% of the result. This was a direct withdrawal of the stock exchange rate at the beginning of the year at almost 40%. We believe that the exchange is balanced in the various aspects that the company must take. Finance and tax development are becoming increasingly important. It is an issue we use a lot of time and attention to. Many people think that the tax should be developed. We find that interesting to hear. We would like to show first how our key figures are in relation to the financial pull. In summary, we believe that a stable and strong key figure is what defends our solid rating. We are one of the few companies in Scandinavia that has changed both the rating and outlook since 2021. We now have a BA2 with stable views. If we compare the key figures at the beginning of the year to now, it is unchanged in terms of tax liability. The tax liability is somewhat low due to increased tax costs. The liability reserve is still very high. We see that our loan portfolio is extended to 3.7 years. Our interest portfolio is slightly down, and that is largely unchanged. But it is very close to the goals we have set ourselves, especially in terms of tax liability. We have said -50-50, and we are at 37%. It is likely that in the foreseeable future we will be between -45% maximum. The tax development is a nice story to tell. When we look at our own average income tax, for the sake of order, it must be stressed that our average income tax is the tax we pay, and includes a credit deposit. We see that since the increase in taxes began three years ago, the tax liability has increased by .5% to the current level. Our average income tax has increased by 2%. We have very good financial access to the banking and capital markets in the first half of the year. We are experiencing constructive good dialogues in the banking and capital markets. If we look at the right side of the screen, we see that the small green part, especially the tax liability, has increased a good part in the second quarter. We have experienced that market, and have seen a little renaissance in the latest ways. If we look at credit margins, we can reach the cheapest loans. But of course, they are short-term, so we must have a total portfolio that is in line with our own goals. We had a half-year shift, and had a 68% drop in the capital market. But if we include the unused credit margins, it is 50-50. We have very good liquidity reserves, and we have also very low financial needs in the future. In the second half of the year, we have 5.3 billion in the stock market, and the annual liquidity reserve is 7.8 billion. In the second quarter, we entered new agreements in the banking and capital markets, at about 4.8 billion. What we are using some time for is to look at the interest rate scenario in the future, and how the interest rate should develop. There have been major changes over the summer. In the graph to the left, we see three scenarios, where the green is the main scenario, which is based on the market today. Then there is a turn with 150 basis points below, and 150 basis points above. To the right, we see the market's interest rates in NOK and SEC. We see that the market expects a large interest rate decline next year. We have been able to do five-year interest savings, which begin in one year, under very low conditions. We are very concerned with using these markets when we can achieve interest rates at that level. The discussion between the macroeconomists will be about whether it will be in 2025 or 2026, or what the normal level is. It is interesting to follow from the sideline. What is important to us is that we actually use the opportunities that are in the market, and we have done that. This has contributed to the fact that our forecast for the return on interest rates will fall by .4% next year, and the text shows a decline of 4% in three years. This is of course based on unchanged debt and credit margin. We have secured a good return on interest rates, regardless of how the market will develop. We use a lot of resources and energy for the use of bear power. We have made a bear power strategy that has been through several times, with B3 main pillars, climate, nature, circular solutions and social efficiency. We have also been through how we have achieved our goals for 2023. I will not spend any more time on that now, since it can be read. What you can also read, which you can find on olth.no, is our bear power report for 2023, which was published in May. There is a lot of interesting material on climate, nature, energy, social efficiency, etc. I recommend you take a good look at that. Now we will move on to the EINZ portfolio and investments. This is a overview that shows the portfolio at halftime. The portfolio has not changed much. It has a slightly lower value than it had at 31.3, since we have written down the EINZ value. The purchase interest rate is still 75%. ADEEN is the 20 largest, and it accounts for a large part of the purchase interest rates. The possible income is 4% and the logistic is 4% of the total. This is something we get a lot of questions about, the yield development. We see that from the beginning in 2022, the yield has increased by .2% points, similar to both segments. This is a significant value decrease on the portfolio, which I will show in the next picture. We see that the value change in the table, the column almost to the right, is in crowns, where the big value change has been since June 30, 2022. Our income values were at the top at that time. The value change has been 11%. As a result of the consistent demand for demand, the yield has increased from 4.9 to 6.1. We have made a sensitivity analysis in the half-year report for 2022. We do this every quarter, which will also be in today's quarter report, where we showed that a value drop of .2% would add a value drop of 11.9 billion 20%. We must conclude that the yield growth has significantly reduced the value drop since we have only booked 6.5. Around 5.3 billion has been reduced due to the yield growth of 9%. In the rough figure, half of the expected drop is compensated with increased yields. We are very pleased with that. The shopping center is still at 35%, as I said. We are so unsatisfied that we call ourselves the leading shopping center in Norway. We have 60 centers. We are not in any competition for the most possible centers. We are concerned with the largest possible centers and have market value at 44.9 billion. I find it interesting to see that in relation to the values from two years ago. If we include the yield we bought for 1.3 billion, the yield is 1.5. We have the same yields, mostly. We have higher yield, but they are less valuable. As long as we are in a solid balance, it is not a concern that bothers us from day to day. This is a overview of the 20 largest. It speaks for itself. We have a good foundation among the largest centers. And we have a relatively good development of the large centers. The business sector is our second segment. We are a large empire, with 65 business sectors. The same picture, the market value is lower than two years ago. The loan level is higher. Not a big problem, as long as our balance is so solid. Business sectors include 400 exporters. The yield has increased by 1.2%. We have an investment strategy, which is summarized in the icons in the schools. Revenue, development, ownership. This means that we buy property that we in the business sector want to develop. And we have a portfolio that we like in the property. So we are sitting in the bed. We believe that the ownership portfolio is a good form of management for the company in the future. We have invested 8 billion in the last six years. And we have some low investments this year. We hope to increase the investment in the next six months. We have some property projects. They are not the biggest projects we have had. But we are developing our property gradually. From the Guden Stor Center. We have a residential property in Oslo, which is finished. We are developing a part-time company. We have new projects that may start this year. For new outdoor shopping centers, both in Mås and in Kristiansand. We have property projects in Måsvasker, which we hope to start. We also have bigger projects in the planning, which you can read about at olt.no. Macroeconomy is very exciting. When I talk here, I don't know what the Norwegian Bank has announced 20 minutes ago. But we have to take a look at what they said two months ago. This is the last prognosis. We see that the annual growth is developing well. Both for the employers and for the private consumer. 2024 and 2025 we are with a real estate growth in all areas. Private use is relatively low. In 2024, 2025 will increase. The employment is low. It wakes up around 2%. The most interesting thing is the housing investments. This is a change from the previous year. Yesterday it was a decrease of 16%, 15.6%. The prognosis is that it will be this year. And that it will turn to next year, and that we will get a growth again. But with so little housing investments and real estate growth, it is not so surprising that the housing prices show a good development. The prognosis for the next three years after 2024 is very positive. 7%, 8% and 6% and 6%. If you look at the rent, it is what the Norwegian Bank said in June. It is expected that the rent has not been changed today. And that they will keep the formulations about the rent from June. The most exciting moment is how they will comment on the development of the currency exchange. What they said in June was that the control interest will be stable this year, before it gradually goes down. It was most likely that it would go down in the first half of 2025. They express that there is uncertainty about further development in the Norwegian economy. They are a reasonable way to take it, when you look at how volatile the market is and how fast things are changing. They said that where the crown is weakening, the interest and price growth can last longer. Then there may be a need to raise the rent. On the other hand, where the unemployment is increasing, or the inflation is falling faster, the interest can be lowered earlier than we see. What one must say is that the crown has weakened more than what the Norwegian Bank has predicted. And the inflation has also fallen faster. So, both the pros and cons. I am looking forward to reading the press release from the Norwegian Bank later. If we are to start with a short summary, the growth in the Norwegian economy has fallen through last year and is now low. Despite the low growth, we have a low unemployment and high wage growth. The price growth has now fallen significantly in 2023 and 2024. It is lower than what the Norwegian Bank has predicted, but it is still higher than the target. We are being told that Norway is most likely at the top of the tax. But the bank has reported that the tax will be maintained unchanged for a while. This is in conflict with what the prices marked and what some macroeconomists are trying to predict. If we go to our own data, we can say, even though the results in Q2 are not the best we have presented, that the operating results of the concern are maintained at a good level despite the high tax increases. We think that we have managed both the tax increases and the value drop in a completely uncountable way. Despite these uncertain times, we believe that our market position and financial position will still be able to contribute to good operating results in the future. In summary, we believe that a good development of results, low tax rates and high credit rates will give us good opportunities to use these opportunities that will arise in the future. Then we are over to questions and answers.

We have received some questions. We can start with the first one. The investment level fell to 376 million in the first half of 2024, compared to 1,947 million in the same period last year. You have written for a while that the investment period will be up and that you see more opportunities to collaborate with earlier. Will you compete with the ongoing processes in the market?

I would say that there is still a big gap between buying and selling. Selling would like to sell at the prices of 2022. We would like to buy at the prices of 2024. Therefore, there has been a gap in some processes. We do not experience that we have been -of-contest in many processes, but in some processes we have been -of-contest. We hope that we will return stronger already in the fall. But of course, who knows what the market will bring.

Then I have a new question. It looks like there will be more negative changes in the value of the FKV-TS than in the 100% owned shopping malls. Is this correct? In that case, what is the reason?

I have to put it in the sense that the difference in the revenue is correct. The reason is that in FKV, where there is a shopping mall that we own 50%, I assume that there is a negative development in some of the malls, which is larger than the average of those we own 100%.

Good. I have a few more here. In Q2, you have earned from buying back on the obligation loan, and the cost of terminating the rent has increased. Can you tell us what has been

done? If I may briefly tell you, we refinanced an obligation loan that falls in August 2025, in May. It was an obligation loan with a fixed rate of 2.03%. It sounded completely stupid to refinance that. The point is that we control our rental profile through a portfolio, so that our fixed rate obligations are assigned to the tenants. So then we get a profit on the obligation loan, while we get the corresponding loss on the rental weapons that are linked to the obligation loan.

Good. You say that you want to make more investment in the future. Is it like that there are projects that are in focus, or is it buying property that is most likely?

New

properties,

then? I hope and believe that we can say yes to both. We have a number of projects that we are working on at the moment. The new properties will be in focus, but not necessarily in the next six months. I think of the big ones, for example, like Gunnerius, which we have worked on for a human age, but it will be in focus, but maybe not in the next six months. I hope that we will be able to increase investments both through new purchases and through new projects.

Great, thanks. It looks like there are no more questions. Then I

say thank you very much for the interview. You have one minute left until the Norge Bank Live in Arndal. I welcome you back to the next webcast, November 7, where we present the report for the third quarter. I wish you a good late summer, with many good, warm days, and nice autumn colors. Have a good one.