Return

At the end of 2017, the equity value of the portfolio was NOK 2.59 billion. The portfolio generated a return on equity in 2017 of 15%.

Market

2017 proved to be another busy year for transactions in the commercial real estate market, with a large number of transactions, and total transaction volume in line with 2016. During 2017 it continued to be large regional differences in the commercial property market where areas with many oil-related companies still experienced higher office vacancy rates and stronger downward pressure on rental rates than other areas, such as Oslo’s central business district. There were signs of an upward trend for office rental rates during 2017, not only in central Oslo but also other areas of Oslo. Oslo’s west corridor also showed a marginal increase in 2017. As in 2016, this was mainly due to the office supply being limited by conversions of office buildings to residential development, and low construction levels of new office buildings.

The strong performance seen in the residential property market in 2016 continued into the early months of 2017, but was followed by a shift in the market leading to a gradual decline in prices, particularly in the second half of 2017. Prices for second-hand residential properties in Oslo, which increased by around 26% in 2016, fell by around 12% between February 2017 and the end of the year. Sales of new-residential properties also slowed, and new projects that were launched towards the end of 2017 were offered at somewhat lower price levels.

The factors that contributed to the fall in residential property prices, particularly in Oslo, included stricter rules for mortgage financing implemented by the Norwegian authorities aimed at slowing the pace of residential price growth. In addition, the supply of new residential property increased over the course of the year.

Organisation

Ferd Real Estate has eight employees and is organised into the areas of development/projects, investment/finance, markets/rental and property management.

Residential real estate development portfolio

• Tiedemannsbyen, Ensjø:
  The Tiedemannsbyen project has a development potential of approximately 1,600 residential units, and will be developed over a period of around 15 years. The first 660 units are being developed by Tiedemannsbyen DA, while Tiedemannsfabrikken AS will develop the next 700 units.Tiedemannsbyen DA is owned 50/50 by Ferd Real Estate and Skanska Bolig, while Tiedemannsfabrikken AS is owned 50/50 by Ferd Real Estate and Selvaag Bolig. The remaining areas are 100% owned by Ferd Real Estate.The “Petersborgkvartalet” development, where the first sales phase for 210 units was launched in the spring of 2013, is now sold out. The remaining units were handed over to the customers in 2017.The “Utsiktskvartalet” development, where the first sales phase for 258 units was launched in the autumn of 2015, is now nearly sold out, and construction is well underway. The units will be handed over to customers in 2018 and 2019.

  Nearly all of the 158 units in the first area (area F) of the “Tiedemannsfabrikken” development, which was launched in spring 2016, have now been sold. Construction is well underway and the old Tiedemanns tobacco factory has been demolished. The units will be handed over to customers in late 2018/early 2019.

  The sales process for the 222 units that form the second area (area E) of the “Tiedemannsfabrikken” development has been launched, and construction has started on the first phase. The first units in this area are due to be handed over to customers in late 2019/early 2020.

  Ferd Real Estate and Selvaag Bolig extended in 2017 their cooperation to also include the next area (area G) of the of the Tiedemannsbyen development. This project is now in a planning phase, and will be ready for a sales launch when market conditions are considered acceptable.

  A total of 109 residential units were sold in Tiedemannsbyen in 2017 as compared to 383 in 2016.

• Bråtejordet, Strømmen:
  Ferd Real Estate is developing a residential area in cooperation with Mestergruppen at Bråtejordet, adjacent to Strømmen station, 20 minutes north of Oslo. The project will comprise approximately 400 townhouses/detached houses/apartments.The first sales phase was launched in the autumn of 2014 and construction work on the first 40 units started in 2015. The first 95 units were handed over to customers in 2017, and the remaining 28 units in the first area (B5) will be handed over to customers during 2018.The next area to be developed (B7) is now in the detailed planning phase, and sales are expected to start in the first half of 2018.A total of 27 residential units were sold in Bråtejordet in 2017 (representing all the remaining units so far available for sale) as compared to 57 in 2016. A total of 123 units had been sold by the end of 2017.
• Ski:
  Ferd Real Estate is involved in two large residential development projects in the centre of Ski, south of Oslo. The projects have a total potential of around 500 units in addition to retail/commercial premises and parking spaces. During 2017 Ferd Real Estate entered into agreements to purchase a number of key properties located in the area planned for development.The development and planning for the city centre of Ski and the areas known as “Skolekvartalet” and “Trekantkvartalet” is now well underway. Skolekvartalet is owned 50/50 by Ferd Real Estate and Ski Sentrum AS, while Trekantkvartalet is 100% owned by Ferd Real Estate.
• Vestre Billingstad, Asker:
  Ferd Real Estate has cooperated with a number of real estate developers with the zoning plan for the western part of an area known as Billingstadsletta in Asker municipality, where residential housing developments totalling up to 1,650 units are planned. The zoning plan for Vestre Billingstad was approved by Asker municipality at the end of January 2018.Ferd Real Estate owns the property at Bergerveien 12, which is currently leased out to ABB. The lease contract with ABB is due to expire in some years’ time, and Ferd Real Estate is planning a residential development project for 420 units following expiry of the lease.

Commercial property portfolio

Ferd Real Estate entered into an agreement at the start of 2017 with Oslo Areal for the sale of the property at Strandveien 4, 8 and 10, which is located adjacent to Lysaker station. This property, which totals 18,000 sqm and is leased out to Lundin Norway AS, was sold for NOK 922.5 million.

• Development:
  Ferd Real Estate has several ongoing office development projects:

  Construction of the Asker Tek building was completed in December 2017. This is a multi-tenant office building totalling 16,300 sqm, and represents the third phase of Kraglund Kontorpark, which is located adjacent to Asker station. The aviation technology company Indra Navia is the largest tenant and the building has been designed with particular focus on modern office solutions, with a high degree of flexibility and emphasis on digital solutions. In addition, Asker Tek is a Breeam certified environmentally friendly building with an ‘A’ energy classification. A further three lease contracts were signed in 2017, and Ferd Real Estate expects to agree leases for the remaining space over the course of 2018.

  Østensjøveien 16 will be an environmentally certified office building of approximately 14,000 sqm centrally located in the Helsfyr/Bryn district of Oslo. A lease contract for approximately 5,000 sqm was agreed with the orthopaedic equipment company Sophies Minde in 2017, and construction is now underway. The building is due for completion in the first half of 2019.

• Warehousing/logistics:
  Ferd Real Estate, Veidekke and Fabritius entered into a joint venture in 2017 to develop the sites owned by Ferd Real Estate and Veidekke in the Gardermoen Business Park, through the company FFV Gardermoen AS. Each of the parties own 1/3 of FFV Gardermoen after the transaction. The land plot is of approximately 360,000 sqm in total, and represent a significant development potential intended primarily for warehousing, logistics and combination facilities. In addition, some areas are also zoned for Big-Box retail.

  Frogn Næringspark AS, in which Ferd Real Estate is a part owner, agreed in 2017 to expand its cooperation for the future development of Frogn Næringspark AS to include NHP Eiendom. The land plot in question total approximately 110,000 sqm with development potential of around 40,000 sqm.

  Ferd Real Estate also owns two sites intended for warehousing and logistics developments at Vestby and Mastemyr. The sites total approximately 240,000 sqm with development potential of around 100,000 sqm.

• Rental:
  With the exception of the remaining areas in the recently completed office building in Asker, and the office building currently under construction at Østensjøveien 16 at Bryn/Helsfyr, virtually all available spaces were fully let at the start of 2018. Ferd Real Estate’s commercial rental portfolio amounted to approximately 145,000 sqm at the end of 2017.

Financial investment portfolio

Ferd Real Estate continually evaluates financial investment opportunities both in Norway and internationally where the underlying asset is some form of real estate.

Future outlook

The Norwegian mainland economy is expected to grow moderately in 2018, with a small decrease in the overall unemployment rate, although with regional differences.

In the Greater Oslo Region, we think that the stable low unemployment rate, the prospect of interest rates remaining low and office rents rising will result in a continued high level of activity in the office market. Following the corrections seen in residential property prices, particularly in the second half of 2017, we now expect residential prices to stabilise in 2018. We also anticipate that sales volumes for new residential development projects will gradually improve over the course of the year. However, any unexpected setback for the Norwegian economy or an unexpected sizeable increase in interest rates could potentially impact the market in a more negative direction.