Sale of the Aibel office building in Asker and Henrik Ibsensgate 4, Oslo.

Summary 2013

• Purchase of Strandveien 4-8, Lysaker
• Purchase of warehousing/production facility in Aarhus, Denmark
• Launch of sales for the Petersborgkvartalet area of the Tiedemannsbyen residential project at Ensjø, Oslo
• Sale of the Aibel office building in Asker
• Sale of Henrik Ibsensgate 4, Oslo

Launch of sales for the Petersborgkvartalet area of the Tiedemannsbyen residential project at Ensjø, Oslo.

Ferd Real Estate is an active real estate investor, involved both in real estate development and asset management with particular focus on the market segments of residential development, office premises and warehousing/logistics facilities.

Portfolio and operations
At the close of 2013, the equity value of the portfolio was NOK 1.45 billion. The portfolio generated a return on equity for 2013 of 6.1%.

Market 

Commercial property rental market: The office rental market has shown a stable upward trend, particularly in CBD areas where there has been good demand. Areas outside the CBD have seen somewhat higher vacancy rates, and this has held back growth in rental levels in these areas. A number of new office projects in the CBD areas have been completed, leaving only a few projects under construction. Tenants continue to expect high standards, and this has resulted in a number of renovation projects. It is increasingly important for office properties to be in a central location and close to a public transport hub.

Purchase of Strandveien 4-8, Lysaker.

Purchase and sale of commercial property: 2013 proved to be a year with a high level of transactions activity, and although there were many transactions, there was a marked absence of very large individual transactions. The availability of finance for commercial property transactions improved in 2013. Investors' yield requirement for commercial properties showed some reduction for properties in the best central locations, but there was little change in the yield requirement for properties in other locations.

Residential real estate: Residential real estate prices showed a weak increase in the first half of 2013, and turnover continued at a normal level for both new and existing properties. However, from autumn 2013 onwards sales of both existing and new properties slowed markedly. Residential prices showed a modest decline from August 2013 onwards, which meant that for 2013 as a whole it seems likely that prices showed a small decline from their 2012 levels. The slowdown in sales of new properties was particularly pronounced in the last three months of the year.

Organisation
Ferd Real Estate has 7 employees and is organised into the areas of development/projects, property management, markets/rental and investment/finance.

Residential Real Estate Development Portefolio

• Tiedemannsbyen, Ensjø (Oslo): Tiedemannsbyen DA handed over the last of the 199 residential units in the Hagekvartalet subarea to their purchasers in winter 2013. The first phase of off-plan sales for the Petersborgkvartalet was launched in autumn 2013. Petersborgkvartalet enjoys a peaceful and attractive location, with easy access to both open spaces and public transport. The first sales phase comprises 61 apartments in total. This project will include commercial units on the ground floor, including food outlets. Petersborgkvartalet will comprise 204 residential units in total.
  
  Tiedemannsbyen DA is owned 50/50 by Ferd Real Estate and Skanska Bolig. The Tiedemannsbyen project as a whole is for around 1,200 residential units, and will be carried out over a period of between 10 and 15 years. Tiedemannsbyen DA will carry out the development of approximately 600 units in the first stage.
   
• Bråtejordet: Ferd Real Estate is developing a townhouse project at Bråtejordet, adjacent to Strømmen station (a few train stops from Oslo), in collaboration with Mestergruppen acting through MG Prosjekt AS. The project will comprise around 350 townhouses and detached houses. The application for detailed planning permission was submitted in 2013, and approval is expected in 2014. 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 was involved in the construction of one new office building in 2013. Aibel's new office building in Bergen will provide approximately 25,000 m² of space and is a state-of-the-art office complex 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). The building is due for completion in the first half of 2015.
  
  Strandveien 4-8 is a development property that Ferd Real Estate will renovate for for occupation by a new tenant. The purchase agreement was signed in 2013, and Lundin entered into a 12-year lease for approximately 13,500 m² of the building's total space of 18,000 m². The property enjoys an attractive location close to the transport interchange at Lysaker, and with good access to the E18. Work on renovating the building will be carried out over a period from the second quarter of 2014 until the third quarter of 2015 when Lundin is due to move in.
   
• Warehousing/logistics:
  Ferd Real Estate has three sites intended for warehousing and logistic purposes at Gardermoen, Vestby and Mastemyr close to Oslo. In addition, Ferd Real Estate owns 50% of Frogn Næringspark AS, which is developing a site intended for warehousing of 95,000 m² at Måna, immediately adjacent to 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 2014, 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 2013. 

International Real Estate Portfolio
Ferd Real Estate has committed EUR 50 million, equivalent to just over NOK 400 million, to the Harbert Europe Real Estate Fund II, which holds real estate investments in Western Europe. The fund has performed well, and the timing of its investments has been relatively favourable.

In 2013, Ferd Real Estate purchased a warehousing/production complex totalling approximately 30,000 m² in Aarhus, Denmark. The entire complex is leased to Elopak on a long-term lease contract.

We also invested in 17.2% of SPG Bostad Örebro, a company that will develop approximately 220 student and housing association units in a central location in Örebro, Sweden. These units are due to be completed in the course of 2014 and 2015.

Outlook

• Commercial property rental market: Labour market conditions are expected to be stable in 2014. Properties in central locations continue to attract greater demand, and vacancy rates for office space are low, resulting in upward pressure on rental levels. Ferd Real Estate accordingly expects to see moderate growth in rental levels in central locations, but somewhat slower growth in rental levels in non-central areas. Both the quality of the space offered and its location are crucial factors in the intense competition to attract major tenants.
• Purchase and sale of commercial property: The relatively 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: Recent years have seen intense pressure on the profit margins for residential development projects caused by high construction costs. The outlook for costs is likely to improve in pace with the reduction in the number of new projects being started, and this will have a positive effect on the development sites held in the current portfolio that are awaiting construction. We expect to see an improvement in the residential real estate market following a modest fall in 2013, with moderate growth in residential prices over the next few years.