Release Date: April 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Entra ASA (LTS:0R3Y, Financial) reported a net asset value increase to NOK163 per share in the quarter.
- The company successfully placed bonds of NOK3.1 billion and closed bank financing of NOK17 billion, extending debt maturity to 4 years.
- Entra ASA (LTS:0R3Y) has a high-quality tenant base, with 50% of revenues from the public sector, providing stable cash flow.
- The company has a disciplined approach to capital allocation, prioritizing projects that enhance letting in the management portfolio.
- Entra ASA (LTS:0R3Y) reported that 100% of its revenues and CapEx are taxonomy eligible, aligning with EU sustainability frameworks.
Negative Points
- Rental income of NOK774 million was NOK104 million below the same quarter last year, after adjusting for divestments.
- Net letting was negative at NOK73 million for the quarter, with terminations offsetting gross letting.
- Occupancy is currently at 93.8%, below the company's target of 95%.
- The YARA deal will have a negative net letting effect of NOK25 million in the second quarter.
- The company has experienced three consecutive quarters of negative net leasing, impacting rental income trends.
Q & A Highlights
Q: Entra has now seen 3 quarters of consecutive negative net leasing. When do you expect the operational environment to improve?
A: Sonja Horn, CEO: We anticipate that letting activity will pick up due to a significant volume of leases set for renegotiation in 2027. However, recent increased uncertainty may cause tenants to delay decisions. We expect improvement in the letting market, which should enhance the operational environment. The volume at risk is limited, providing upside potential in our letting business.
Q: Can you reconcile the comment that the work-from-home trend has reversed, but tenants are reassessing their office requirements due to hybrid working?
A: Sonja Horn, CEO: Tenants are renegotiating leases that are 7-10 years old, reflecting changes in work habits. More space is now used for meetings and collaboration, reducing the need for individual desks. Tenants are open to alternatives, considering refurbishments or moving to new spaces. While office presence has returned, the nature and timing of office use have evolved.
Q: How do you expect occupancy to develop going forward?
A: Sonja Horn, CEO: We expect occupancy to remain around current levels in the second quarter. Our target is to reach 95% occupancy, but it may take until next year to achieve this. The rental income bridge reflects all known events, offering more upside potential as we work to intensify letting activity.
Q: Is the negative net letting of -25 in the second quarter from the YARA contract included in the rental income bridge?
A: Sonja Horn, CEO: Yes, the net letting effect is included in the rental income bridge. The new lease contract with YARA was expected to start in 2027, beyond the current forecast period.
Q: What are your latest funding conditions, and do you see banks being more cautious?
A: Ole Gulsvik, CFO: We haven't observed changes from banks. We completed our bank refinancing in March. In the debt capital market, spreads have widened since our February bond issuance. Moody's affirmed our A rating, and we aim for a rating upgrade to reduce funding costs. Currently, there are no changes in bank behavior.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
