OPERATIONS AND RETURNS
At the close of 2012, the equity value of the portfolio was NOK 1.5 billion. The portfolio generated a negative return on equity for 2012 of 0.8%. The negative return was largely due to downward adjustment of valuations of development sites for warehousing/logistics facilities, partly because the process of planning permission for these sites is taking somewhat longer than anticipated and partly because market demand is for the moment somewhat lower than forecast when these investments were first made.
All the existing office premises and warehouse facilities in the portfolio are currently virtually fully let.
- Commercial property rental market: Despite a large number of recently completed new office buildings, the combination of strong conditions in the Norwegian labour market, conversions of existing office buildings to residential developments and the temporary removal of office buildings from the market for rehabilitation has resulted in falling vacancy rates in the Oslo area and rising rental levels, particularly for office premises in central locations. Rental levels in the warehousing and logistics segment were stable in 2012. There were again relatively few new building starts for large warehouse facilities in 2012.
- Purchase and sale of commercial property: 2012 proved to be a year with a high level of transactions activity, with a significant increase from 2011, despite more challenging lending market. Higher margins on property finance were to some extent offset by lower long-term interest rates. Prime-yield was approximately flat, but yields increased somewhat for properties in less central locations.
- Residential real estate: Residential real estate prices again increased in 2012, with prices for apartments in Oslo rising by around 9%. There is still an imbalance between the supply of new residential units and demand, creating favourable conditions for sales of new units. There is a shortage of residential development sites in central locations, and land-prices have risen markedly over the last two years.
Ferd Real Estate has 7 employees and is organised into the areas of development/projects, property management, markets/rental and investment/finance. In view of the increasing volume of project activity, we intend to increase our capacity for the projects area in 2013.
RESIDENTIAL REAL ESTATE DEVELOPMENT PORTFOLIO
- Tiedemannsbyen, Ensjø (Oslo): Tidemannsbyen DA launched the first units of its residential project in Spring 2010. The remaining units in the first part of Tiedemannsbyen (Hagekvartalet), representing 199 townhouses and apartments, were all sold in 2012. A total of 123 units were handed over to customers in 2012, and the final 76 units in the Hagekvartalet were handed over in winter 2013. Over the course of the year, we sold 57 units in total, representing total value of around NOK 220 million. Residential purchasers are showing increasing interest in Ensjø and Tiedemannsbyen in pace with the development of Ensjøbyen as a new residential area. We expect to launch the next part of 200 units in 2013.
The project for the first three development areas, which comprise around 600 residential units in total, is being carried out in partnership with Skanska Bolig AS through the company Tiedemannsbyen DA on a 50/50 basis. The Tiedemannsbyen project as a whole is for around 1,200 units, and will be carried out over a period of between 10 and 15 years.
Ferd Energi AS received a final permission the Tidemannsbyen development to be exempted from the mandatory connection to the district heating network, and started supplying hot water and heating to the residents of Tiedemannsbyen from its bio-generation local heating facility.
- Bråtejordet: In 2012, Ferd Real Estate, together with Mestergruppen, signed an agreement to purchase a residential development site at Bråtejordet adjacent to Strømmen station, 20 minutes form Oslo. The project will comprise around 350 townhouses and detached houses. The process of detailed planning permission is now underway, and the start of construction and off-plan sales for the first units is expected to take place sometime in 2014.
COMMERCIAL PROPERTY PORTFOLIO
- Development: Ferd Real Estate signed a lease contract in autumn 2012 with the oil services company Aibel for the construction of a new office building at Kokstadvegen 23 in Bergen. The building will provide around 25,000 m² of space, including parking.The development will be a state-of-the-art and forward-looking office building with particular emphasis on a number of environmentally friendly and energy efficient solutions. The building is due to be certificated with energy efficiency class ‘B’ and a BREEAM score of ‘very good’. This building will be the first phase of what will become a modern business Park at Kokstad (Kokstad Business Park), and is located adjacent to one of the stops on the future extension of the Bergen light rail transit system. Construction work started in October 2012, and completion is due in spring 2015. The building contractor is Skanska Norge.
In May 2012, we handed over the final phase of the Aibel office building at Hagaløkkveien 28 at the Kraglund Office Park in Asker to the building's tenant, Aibel. This building was developed by Ferd Real Estate as the project owner, and was completed in two phases with handovers in December 2011 and May 2012.
The total development represents approximately 28,000 m² of office space, storage and parking. The first phase achieved certification with energy efficiency class ‘B’ and the second phase achieved energy efficiency class ‘A’. The first phase achieved a BREEAM certification score of ‘Very Good’.
Ferd Real Estate has three sites intended for warehousing and logistic purposes at Gardermoen, Vestby and Mastemyr close to Oslo. In 2012, we also purchased 50% of Frogn Næringspark AS, which owns a site intended for warehousing of 95,000 m² at Måna, immediately adjacent the entrance to the Oslofjord Tunnel. These sites represent total development potential of around 180,000 m².
- Commercial rental: The available space in our rental properties was virtually fully let at the start of 2013, including office space at Ensjø and the factory buildings that are let on leases determined by the demolition program.
Ferd Real Estate’s commercial rental portfolio amounted to approximately 125,000 m² at the close of 2012. The Tiedemanns site at Ensjø in Oslo accounts for around 30,000 m² of the total, and this space is rented out for periods that reflect the timetable for demolition as the residential development of this site proceeds. At the end of 2012, this space was almost entirely rented out for warehousing.
INTERNATIONAL REAL ESTATE PORTFOLIO
Ferd Real Estate has committed EUR 50 million, to the Harbert Europe Real Estate Fund II and Fund III, which holds real estate investments in Western Europe. The fund has performed well, and the timing of its investments has been relatively favourable.
- Commercial property rental market: Fewer new office buildings are due for completion in 2013 in the Oslo area than in 2012. Since macroeconomic conditions continue to be favourable and vacancy levels for office space continue to fall, particularly for central locations, we believe that rental levels for office space will continue to rise in 2013.
- Purchase and sale of commercial property: The stable outlook for the Norwegian economy makes it likely that investor interest in the Norwegian real estate sector will continue to be strong. Ferd Real Estate continues to work on identifying attractive investment opportunities that fit with our strategy and meet our target for investment return.
- Residential real estate: We expect the residential market in Oslo to remain strong over the next few years, but rising prices for development sites and higher construction costs are putting pressure on profit margins for residential development. Work on the development of the Tiedemannsbyen project (in collaboration with Skanska Bolig), and on the Bråtejordet project (in collaboration Mestergruppen) will be important tasks for Ferd Real Estate in 2013, and this will continue for several years to come.