Olav Thon Eiendomsselskap ASA

Welcome to this presentation of the fourth quarter of the Olav Thun Business Association in 2024. It is nice to see that so many have come in front of their screens. The fourth quarter of 2024 was a very special year, a very special quarter for the Olav Thun Business Association, and we must start with the most important thing that unfortunately happened, namely that Olav Thun left in November. At the age of 101, Olatun founded the Olatun Næringsselskap in 1983. Olatun went off as a 100-year-old board member in 2023, but was an active and inspiring board member until his death. He took part in an active and positive way in November, ten days before he left. It was said very nicely and positively in connection with his departure. Everything was very well done. One of the first to leave was the country's prime minister, who described Olav Thun as a single-minded businessman and social builder. En epoke i norsk næringsliv er over, ble uttalt, og en inspirasjon til alle som tenker stort var også gode utsang som kom. For egen del må jeg legge til at han var en usundvanlig, inspirerende leder gjennom veldig mange år, og en person som hadde en egen evne til å se mennesker i organisasjonen, i tillegg til å spre gode, A warm welcome to this presentation of the 4th quarter of the Olav Thun Business Association in 2024. It is nice to see that so many have come in front of their screens. The 4th quarter of 2024 was a very special year, a very special quarter for the Olav Thun Business Association, and we must start with the most important thing that unfortunately happened, namely that Olav Thun left in November, at the age of 101 years. Olav Thun founded the Olav Thun electricity company in 1983. He left as a board member 100 years ago in 2023, but was an active and inspiring board member until his death. He took part in an active and positive way in November, ten days before he left. It was said very nicely and positively in connection with his departure. Everything was very well done. One of the first to leave was the country's prime minister, who described Olav Thun as a single-minded businessman and social builder. En epoke i norsk næringsliv er over, ble uttalt, og en inspirasjon til alle som tenker stort var også gode utsang som kom. For egen del må jeg legge til at han var en usundvanlig inspirerende leder gjennom veldig mange år, og en person som hadde en egen evne til å se mennesker i organisasjonen, i tillegg til å spre godt arbeidsmiljø gjennom sin uformelle og likandes måte å være på. So it is an inspiration for us who will continue to manage the heritage. So rest in peace, Olav. Then we will move on to the fixed posts, namely financial development and stock information, financing, property portfolio and market economy. We have a question part at the end, so it's just to send in questions along the way, and then we will try to answer them when they come. Financial development and share information is the first point. The fourth quarter, you would say that there was a stable development in rental income, and increased property values contributed to a good quarter result. I will come back to more details. A good quarter result is good, but it is not very good, it is not particularly good. It's not that good either. It's completely OK, even though the nominal figures are good, with a result before the tax on almost 1.3 billion. We had valuations on the earnings portfolio and on financial instruments at 725 million, so the result before these valuations was 526 million kroner, exactly at the level of what it was last year. If we compare this with the situation two years ago, we have increased the shareholder share from 50 to 51, we have reduced the loan rate, and we have also increased the liquidity reserves. In the fourth quarter, there has been a stable drop in shares in Olatone. If we look at 2024-01, it was a solid 25% drop, including the exchange rate that was paid in May. The retail turnover in the shopping centres continued to increase, with an increase of 2.3 percent from the same quarter last year. If we look at 2024 as a whole, the increase was 3.3 percent, on average on the level of the price index, if we are to be a bit rough there. If we then go into a little more detail on the figures, we see that the rental revenues increase somewhat moderately, both on and throughout the year. If we look at the rental growth from 2023, the increase was 1.3% in Q4 and 2.3% throughout the year. We come back to an explanation of the somewhat weak rental growth. We see, as mentioned, that the result for the tax was 526 million. compared to 518 in the previous quarter. The market value of the units is increasing. The interest rate has also increased in connection with a transaction. The loan rate has increased by 36%. The interest rate has, among other things, due to some lower financial costs, shrunk over 3-0, which we are very pleased with. The liquidity reserves have been maintained at an adequate level. and the share price rose 2 kroner in the course of the quarter. If we look at the whole year under 1, then the result for the tax is 2.1 billion, some down from last year. I will come back to some explanations around that. In spite of that, the loan rate has been reduced, the interest rate has been maintained at a high level, and the liquidity reserves have increased. Some of the reasons why the results are not stronger than they are, is that property-related costs increase quite a lot, both in the fourth quarter and in the year as a whole. In the fourth quarter, we see that In the same way, an increase of 16 million kroner will result in an increase of 37 million kroner, and in 2024, an increase of 53 million kroner will result in an increase of 84 million kroner in these costs of X joint assets that are further burdened. We see the same-sex costs as good costs to get, and we want to We will increase the value of the property portfolio afterwards. I will come back with some good examples of projects that are now in rehabilitation. We like to wear long glasses and often look at the period from when the interest rates began. The first of the 14 interest rates came in 2021. If we compare the results of 2024 with 2021, we see that we have had a good rental growth. The net rental costs have also increased with a fairly high rate. In spite of this, we see that the results before the tax costs of valuations and currencies have increased compared to 2021. And the value of the substance is now at a higher level than it was three years ago. The loan rate is also kept at a moderate 36 percent, just marginally up from 2021. If you look at the rental income, we have looked at it a little more now, since we think it was perhaps a little lower than what we had expected. If we could only hope for, then we have a fairly flat development in rental revenues with 2.3%. But there are big differences between our two main segments. The shopping center segment has had a change that is somewhat in line with KPI and is a good development. The rental income has been completely flat. because we have larger properties that are now empty and are a reason for rehabilitation. I come back with a description of these extraordinary properties, which now get a treatment that they deserve, and which will make them even better equipped for future high rents. The share price development has been good, one could say, almost in all periods that we have seen in the last five years, with 49% in the last five years. And the last two years, 37%. We are quite satisfied with that, based on how the interest rate has affected the company. The exchange policy states that the annual exchange rate will result in 30-40% of the result x values. The board's proposal for the exchange rate for 2024 is a marginal increase of 4% from SEK 7 last year to SEK 7.25 this year. It is now placed at the top of the interval at 39% of the result. We believe that this is a level that balances both the shareholders' desire to get ongoing spending, in line with the spending policy, and the credit market's desire to maintain a solid financial position. We believe that this balances their view in a responsible and good way. Financing and interest rate development is also an exciting topic in our days. We have our defined financial policy. where we also, this quarter, show strong key figures that defend a solid rating. In relation to the previous quarter, there are small changes, aside from the fact that the target on the loan rate is reduced from 45 to 50 to a maximum of 45% over time. The interest rate has increased, The liquidity reserves are now at a somewhat more normal level than they were at the beginning of last year. This has contributed to both the fact that our credit rating was renewed in November, but the views were also adjusted to positive in November. This had a connection with both how the company has delivered results over a long time, but also the slightly pointed goal of a maximum loan rate of 45%. We are very pleased that we were able to adjust the positive views, and that has already given us quite good results, we must say, in the capital markets in both Norway and Sweden. Renteutviklingen. Nå er renten på vei ned. Rentekostnaden er på vei ned. Hip hurra. Om det blir ett, to eller tre rentekutt, det er om stridestilllerde. Vi er vel ganske... We are certain that at least one will come. We have such a large share of fixed interest that our interest rates will be stable or weakly falling almost regardless. And in the course of the last year, we have reduced our interest rate by 0.25%. We have already got the quarter that the macroeconomists are talking about coming soon. We have, I would say, very good access to financing. And the last quarter has increased a good deal in the obligation market. We have also had certificate loans within the quarter, but which have fallen during the year shift. By the end of the year, there will be a larger share of banking financing. We experience the financing markets as very good, both in the capital market, especially in the capital market, but we see that our dear and well-known banks now have a solid increase in credit margins, and we appreciate that. We have good liquidity reserves, and they are relevant in relation to the interest rates we have. In the fourth quarter, we entered into a financing agreement of almost 4 billion, with new bank agreements, loan agreements in the capital markets, both in Norway and Sweden. Then we will move on to what we leveraged in addition to getting lower interest rates, namely the property portfolio and the investments. This is our business portfolio at the end of the year, where we see that our shopping centers, our largest segment, are within the top 20, which now accounts for 43% of the company's balance, 11 pieces. Shopping centers account for three-fourths of the portfolio, while businesses account for 25%. I think I will go into more detail on this now. What we have shown a few times is how the value change has been from what we call the preliminary peak in the first half of 2022. That was when we started to write down the unit values. We have then written down the property values with 5.9 billion. This is as a result of the fact that the net tax rate has increased by 1.3 percentage points. This was, as I mentioned before, more than a worst case scenario that we had. But in the Q2 report for 2022, we showed the sensitivity analysis that we are trying to find in all our quarterly reports. that a yield change of 1.3% will lead to a value drop of almost 13 billion, 22%. We see now that the result of such a yield change has been 5.9 billion, i.e. the rental growth in the same period has reduced the value drop significantly, around 7 billion. Lending growth is not a coincidence that we have achieved. We have invested some money, but it is also the result of good work among our talented colleagues on the property side, which is fabulous in terms of getting good margins and increasing lending revenues where possible. Thank you. The purchase center unit is now 56 units. We have given away, we have split the AMCO unit and come back to that. Then it was four slightly smaller purchase centers that went out of the balance. The market value now is lower than it was at the top two and a half years ago, even though we have bought centers both in January 23 and December 24 for 2.1 billion. But the market value is one thing. What we are living off is the interest rate level, which has increased significantly, by 500 million, in the same period. I'm going to tell you a little bit about the transaction that was made public just before Christmas, namely that our subsidiary company, Anko Eiendom, which we own 50% together with Coop, was partially restructured in December 2024. Then six of the company's eight shopping centers were divided into the owners. Olatone Næringsselskap increased from 50% to 100% in the largest centers, namely Amfi Sogningen in Sogndal and Amfi Eidsvoll in Akershus commune, Eidsvoll, while Coop took over the owner's share in four slightly smaller centers. Nettoeffekten for Olatone Egnavselskap er at i balansen vår, investeringseiendommer øker med 830 millioner kroner, årlig leienivå øker med 70, mens andeler i fellskontrollert virksomhet tilkryttet selskap blir redusert med 160 millioner kroner. A word about the joint control of the company, Tiltrystøys Selskap. The sum of the investment, which came out of that part of the balance, was about 600 million kroner. At the same time, help was lowered to 440 million kroner, so that the share was reduced to 160 million kroner. These centers had a low rent level of 45 million kroner in total. For us, this is a well-known and dear overview of the largest shopping centres in Norway. The grey background, if it is possible to see, is owned entirely by the Devle Sovlatoen Real Estate Company. We are so unscrupulous to say that in 2024 we will also consider ourselves as Norway's leading shopping centre actor, especially with a focus on the largest. Our fourth segment, which is up to 25% of the portfolio, consists of 65 business units. The market value is also lower than it was two and a half years ago. The rental interest rate is higher. All this is explained by the yield, which has increased by 2%. We have an investment strategy that is observed in the old business words. Business, development, ownership. The main focus is purchase of property and projects under implementation. In Q4, we had an investment of 1.1 billion. That was in connection with this, among other things, AMCO transaction. So in total in Q24, the investment was 1.8 billion for 2 million in Q4. 2 billion, sorry, in 2023. So the total deficit in 2024 was not as low as we had thought along the way this year. We have started larger upgrade projects on some central fleet properties in the centre of Oslo. To start with Koppgården, It is a monument of timeless elegance. It is a Renaissance courtyard built in 1880. It has the fact that it has a facade both towards Stortorvet, as it is addressed to, and Karl Johan, and Kirkegaten. This building will receive a lovely upgrade. av 2200 kvadratmeter kontor og handelsareal. Dette skal bli en fremtidig perle, og dette prosjektet ferdestilles sommeren 2025. The effect of such upgrading projects is that they in the short term give lower rents, because the property is emptied, and in addition the costs increase, so it is not free to bring an old renaissance yard back to its old size. It costs money. We think it is reasonable, definitely, for the first thing, because it is important to but also because it will be able to increase the income level significantly on an property like this. Another example is Vika Atrum, where we also have a fairly large upgrade in the running. Vika Atrum is a nice landmark in CBD West. It's not just something we say, or I say here and now, but Vika Atrum has in common with Slottet Stortinget and a couple of other buildings in Oslo Centre, that they have a bus stop called after them. And I think it's very nice that the bus stop outside Vikatrum has the name of the property. The project will be completed in the next two years. We also have some larger projects that are in production. Lagunen is being expanded, Gardermoen Park is being expanded by Lager Logistikbygget 10,500. In addition, there are a few smaller projects. Renewal, shopping center, housing project and new building and rehabilitation in Sandens. We have several projects under planning. That is what it is with an integrated property development and a property company like ours. When you do property development, costs are incurred that you get back when the project is carried out. But in a phase where you have a number of projects under planning and regulation, costs are incurred that you get back on the side. The macroeconomy is not completely irrelevant either. These are the latest forecasts from December from the Norwegian Bank. It was confirmed last week that there were no significant changes to these. What is nice to see for our shopping centres is private consumption, which is expected to increase from 1.25% growth to 2.6% in 2025. The annual wage growth is going down from 5.2 to 4.2. In relation to the expected price rise, we will probably have a real wage increase for the second year in a row. which is relatively strong, I would say. And you can see the consequences on the housing prices, which you expect to increase by 69% this year. And there is reason to believe that it may be higher than that as well. This will probably also mean that housing investments will eventually come up on the plus side. And it will also, as the Norwegian Bank sees it, be an increase in BNP Vestland Norway from 0.9 to 1.4. Not a lot of growth, but even to top it off. What is very positive is that registered employment remains low. The wording from the previous report was that the time is now about to begin to lower the interest rate. It was said that there is still a need for an intensive monetary policy, but as I said, the time is about to begin to lower it. The prognoses showed that the interest rate is most likely to drop in March, and that has been repeated so many times now that we believe in it. And then there will be another one or two interest cuts in 2025. But they have, of course, all possible escape options, because if the crown becomes weaker than the other, there may be a need for a higher interest rate, or if the price growth becomes lower or the liquidity increases more, there may be a need for a lower interest rate. An interesting question today is, What will be the consequences of an eventual trade war? An obvious effect of 12 is perhaps increased prices, which again would mean perhaps higher interest. On the other hand, a trade war will perhaps contribute to lower growth in the decline period in the economy. And then it is not clear that one should increase the interest again, so I have a lot of respect for the macroeconomists who say that it is very uncertain and that it is difficult to be clear on the prognoses in the future. Then we come to a summary. The growth in the economy is what it took off last year and is low. Men vi så at den vokste mot slutten av fjoråret. Tross for det er ledigheten lav og lønnsveksten høy. Prisveksten har kommet godt ned, men er høyere enn inflationsmålet. Fortsatt. After the Norwegian Bank raised the interest rate in December 2023, it has been unchanged throughout the year 2024. This has signalled that the interest rate has probably gone even further than that. It will be lowered in 2025. Already on March 27, many are expecting a cut in interest. All in all, we believe that the company's market position and financial position will be able to contribute to a continued good operating result development in the future, in spite of a high interest rate and ongoing uncertainty. We also believe that good result development, our profitable balance sheet, good liquidity reserves and sovereign financing opportunities give us good opportunities to take advantage of the investment opportunities that will arise in the future, and there will be many. So now we have come to the questions and answers round. Så er det kommet inn noen spørsmål?

Ja, men ikke så mange som vanlig.

Nei, det er vel antageligvis, for det er krystallklart, vet du.

Ja, det er kommet inn spørsmål knyttet til brutto leieintekter. Hva er årsaken til at brutto leieintekter ikke økte mer enn fra 949 millioner til 958 millioner fra sammenlignet med samme kvartal og året før?

I think that was explained by these larger units that are out of production during rehabilitation. So that is the main reason.

The next question also has to do with gross and rental income. It is about the prospects for an increase in gross and rental income in the future in a time with a relatively high price increase.

We have ambitions to increase rental income in the future, at least in line with the consumer price index.

The next question is about the income and LTV and plans for the future. The question is, LTV is very low, and the exchange rate is not the highest of your income per share. How do you see using your strong balance?

We want to keep the loan rate relatively low, but as I showed in a planche earlier, we have a high of 45%. We have quite a lot to go on between 26 and 40%. We have said a few times last year that we hope to make some big, good investments. We were very strong last year, we have to be able to say that. So we hope that we can increase the balance with a little more investment in 2025. But the market is demanding, so time will show.

Great, then I think I have come to all the questions here in the chat. How does turnover affect the stores at the rental level?

Most of the lease agreements have revenue-based lease over a certain level. That means that when the revenue increases, the lease also increases. But most of the leaseholders have a fairly high level, so that of our total lease income at the shopping center, less than 10% of the revenue-based. So in the course of purchase, the lease income increases for us.

The last question is about costs. The cost of ownership was higher than before. What lies behind this?

As I also wrote in the press release, it is investments in projects under implementation. It is also costs related to project development. In addition, it was a take on rental requirements, which is slightly greater than what it normally has been. And we also have to say that the costs related to new reporting requirements, new reporting routines, sustainability, etc., are also... And it's also cost-saving. In addition to the transactions you work with that don't cost anything, it's not free either. So it's the sum of a number of factors. And that's the reason why we think this is a good result, but not a very good result. We want to have an even greater focus on cost-saving in the future in the group.

The last one.

Then there were no more questions, so I wish you all a great Friday, and for those of you who are going out on a winter vacation, I wish you a good winter vacation, and I'll see you again on May 15th. Thank you.