Welcome to Entra's first quarter presentation here in Oslo. Let me start by a few words on what you can see on the picture here. This is our building in Verkstedveien 1, where we, in the quarter, have signed a huge contract with Yara International. Starting with the highlights in the quarter. We have a rental income of NOK 878 million in the quarter. That is 1% rental growth compared to same quarter last year. The underlying rental growth is 6.5% when adjusting for divestments and one-off effects from the first quarter last year. Our net income from property management is affected by higher interest costs, and was NOK 325 million in the quarter.
Our net value changes came in with a negative of NOK 1.627 billion in the quarter. Predominantly explained by the increase of the discount rates from our external appraisers with an average of 10 basis points. Leaving us then with a loss before tax of NOK 1.313 billion. We were very pleased to see that we have had a very high letting activity in the quarter, leaving us with a solid net letting of NOK 28 million in the quarter. And also pleased to see that we signed the final agreement for the sale of the Trondheim portfolio, in line with the terms of the letter of intent, and closing of that transaction will take place on May 31st. So move on to operations. Strong operations in the quarter.
We are pleased to see that, we have had, also, the first quarter following an active fourth quarter, very high activity in respect of letting. We signed new and renewed leases with a total rental income, annual rental income of NOK 162 million, or approximately 52,000 sq m . At the same time, contracts, with an annual rental income of NOK 115 million were terminated. However, as much as 92% of that, has, been re-signed within the Entra portfolio. Leaving us then with a positive net letting of NOK 28 million. If you take a look at the largest contracts in the table below, as mentioned, Yara International signed 16,000 sq m with us. They are today a tenant in one of our existing buildings in the same cluster.
They had expanded out of their current offices into two neighboring buildings, and they have now chosen to co-locate in Verkstedveien 1, where we will work with them for the next 12 months to define their future workplace solution, and they also have an option to increase with some more space if they should need more. So this clearly demonstrates also the value for our tenants in having Entra as a strong partner with a large presence in our clusters. In this building, in Biskop Gunnerus' gate 14, BankID has signed 4,000 sq m, taking up two whole floors in this building.
And at the same time, we have then also assigned a lease buyout agreement with one of our tenants to free up one of these floors, which will be shown as a one-off effect in our first quarter numbers. Universal Music, new tenant to us, moving into Akersgata. And in Bergen also, we've signed two large contracts, showing that we also are having a high letting activity in the Bergen market currently. So all in all, occupancy remains stable at 95.3%. And our average lease duration is currently at 6.4 years, including the projects. And we have 57% of our rental income from public tenants, currently.
In Trondheim, we have now signed the final agreement with the buyer for the sale of these 13 assets or 187,000 sq m, which will be then handed over to the buyer on May 31st. This is a huge transaction for Entra. Total value of NOK 6.45 billion, which was signed 1% below our Q4 book values. The agreement also includes the forward sale of our ongoing project development in Trondheim, where Entra will complete the project and the building will be handed over to the buyer upon completion. The proceeds from this transaction will be used to strengthen our balance sheet and should then improve our debt metrics with 4% on the loan-to-value or 4 percentage points on the loan-to-value.
And our ICR should improve with 20-30 basis points following the transaction. And as I said, we will be closing this transaction on May 31st. So, our list of ongoing projects is currently rather short. That is intentional from our part, as part of our disciplined approach on improving our debt metrics. Currently, we have around NOK 549 million of CapEx left on these ongoing projects, and the majority of that, NOK 383 million, is related to the project in Trondheim, which has already been forward sold and at a good project margin in addition to the project cost here.
There's no changes in the table or reporting this quarter other than that, we have taken out the yield on cost and occupancy on the forward sold assets. The other projects are also progressing according to plan. We are now also preparing to start three refurbishment projects in Entra, following lease contracts, which have been signed on one asset in Bergen, a smaller asset in Sandvika, and also one asset here in Oslo, and we will get back to more details on that in the next quarter. So, a few words on the market situation. First of all, it seems to be a consensus both amongst the businesses and consumers that Norwegian economy is heading for a soft landing.
We can see that the expected GDP growth is 1.1% for 2024, and employment has remained stable in Norway. Norges Bank increased the key policy rate to 4.5% in September, and they have now also communicated or signaled that we should be at the top in respect of interest rates. They are, however, still holding back on cuts to ensure that they have control over inflation. Inflation is on a downward trend, and for March, it came in at 3.9%. If we dive into the property market, we can see that the letting activity has been high also in the first quarter. We have had a very strong market rental growth in 2023 and 2022.
Expectations now is that rental growth will take a slight breather in the short term, particularly in the city center, where we have seen even stronger market rental growth than the graph here for the overall market of Oslo indicates. If we dive into the market data now from the first quarter, what we can see is that there are indications of a rather strong rental growth in the fringes of Oslo, where we have seen that currently the break-even rents for new projects in these markets is quite a lot above the market rents. If you look at the bottom-right graph there, you can see that there's been very limited new build volumes feeding into the Oslo market for the last couple of years and also expected this year.
2025 stands out with a rather high volume. That is explained by two large projects being completed. One is the first part of the new government offices. That is, of course, fully let. Secondly is the Construction City, which is a huge project where 80% of the volume has also been pre-let. So these tenants will move out or vacate buildings, which will need some 18-24 months of refurbishment before they come back into the market. So we are not very concerned about that volume coming into the market in 2025.
Now, seeing that we have low vacancies in Oslo, around 6.5%, and the fact that there is very limited new supply coming in, and also the current situation where break-even rents for new build volumes still is quite a lot above market rents, gives rather favorable market conditions for renegotiations from a landlord's perspective. This also was under or supported by the fact that we saw in 2023 that around or more than actually 80% of the large contracts, about 5,000 sq m, were actually renegotiated in the Oslo market. If you dive into the segment slightly below, down to 2,000 sq m, 65% were actually renegotiated.
In a scenario with a soft landing and continued employment growth, combined also then with the low new build volumes and low vacancies, we do believe that we have good prospects of long-term market rental growth in the Oslo markets. A few words also on the transaction markets. First of all, transaction activity was very low in 2023. What we've seen in the first quarter is that volumes have picked up around NOK 20 billion, and the clarity we now are getting more clarity on, both inflation and also interest rates having peaked, expected to see cuts by the end of the year, and continuing into 2025, is also providing good fundamentals for the transaction market. We do expect to see activity pick up through 2024.
Also, of course, supported by financing markets having opened more up and, the tightening credit spreads we have seen in the bond market. Prime yields are currently around 4.7% in the Oslo market. That has been supported by some transactions we have seen in the market. And as you can see from our consensus report, top right, we consensus is that we have peaked in respect of prime yields, and that we should be seeing some compression maybe when we move into 2025. So, before I give the floor to my colleague here, I would like to take the opportunity to thank Anders, seeing that it's his last week in Entra.
He's been with us and served with us for a long time, 35 quarters, including this one. It's been a great pleasure to work shoulder with shoulder with Anders. It's been some challenging times, and for me, it's been really great to have you as my professional partner. But I think that we will clearly miss you for your professional side, but even more so for the person you are. So thank you, Anders, for your service for Entra. Our new CFO, Ole Gulsvik, will join us on the first of August. In this interim period, our Head of Group Accounting, Knut, will serve as acting CFO and also present with me here today and the next quarter. So Knut, floor is yours.
Thank you. Now, operations and financing costs were quite as expected in the quarter. So I will focus on three things in this presentation: the divestments of the Trondheim portfolio, the negative value changes, and the financing situation. Rental income came in at NOK 878 million, in line with expectations and 1% above Q1 last year. Finalized projects put into production and like-for-like growth accounted for an increase of NOK 42 million and NOK 33 million, respectively.
Excuse me.
Oh, yeah. Sorry. NOK 33 million, respectively, while properties vacated for redevelopment and divestments reduced income over by NOK 21 million and NOK 34 million, respectively. Adjusting for a one-off effect of NOK 16 million in Q1 last year, and divestments of NOK 33 million in the period, the underlying growth was a solid 6.5%. Rental income was up 2% from Q4 last year, mainly driven by CPI adjustment, for which the majority of Entra's contracts was 4.8%, with some offsetting effects from divestments and net letting. Net income from property management was down 17% from Q1 last year, mainly due to higher financing costs.
Compared to Q4 last year, net income from property management, however, increased by 10% due to the increase in rental income and lower financing costs due to lower outstanding debt following divestments of three assets in Q1. Like for the last few quarters, profit before tax is impacted by negative value changes. In this quarter, driven by the discount rates increasing by 10 basis points. And I'll come back to the negative value changes in the portfolio later. This slide shows the effect of macro on Entra's numbers, where the effect of the increased interest rates on the PNL and the cash flows are represented by cash earnings, and the effect of increased discount rates on the asset values are represented by the EPRA NRV.
Cash earnings annualized 12 months rolling, currently at NOK 7.7 per share, corresponding to a CAGR since 2015 of 6%. EPRA NRV came in at 158, down from 235 at peak valuations. Still a CAGR of 7% since 2015, or 10% when including dividends of NOK 37 in the period. Then Entra and EPRA NTA came in at 157. So we signed a binding contract for a sale of the Trondheim portfolio in March, and we will close the transaction on the 31st of May.
This means that we will have income from the assets throughout Q, we had income from the assets throughout Q1, and we'll have income from the assets, for the first two months in Q2. As we will sell an entire geographical segment, we have, due to IFRS regulations, separated the results of the management properties in the Trondheim, in the PNL, in the quarterly report, and included the net results from Trondheim after value changes and after taxes, at the bottom of the PNL. In this pre-presentation, we have, however, combined the P, the PNLs of the continuing operations and Trondheim, to reflect the total underlying PNL of the whole portfolio. And this table is also a good indication of how our net operating income will be affected by the sale of the Trondheim portfolio.
However, in Q2, we will have those assets in two months. The effect that this presentation doesn't show is the effect on the financing costs. But the repayment of over NOK 6 billion of our most expensive debt will lead to a significant reduction in financing costs and a significant improvement of our debt metrics. And as mentioned, rental income and operating costs came in as expected. OpEx slightly higher than Q1 last year due to timing of maintenance activities. Other revenues and other costs saw a significant increase in Q1 as we, as part of the Trondheim transaction, will finalize the development of phase III of the Holtermanns veg 1-13, and deliver the property to the buyer upon completion of the project.
The change in accounting resulted in a NOK 72 million in both revenues and costs in Q1. Going forward, the revenue from the development will be booked in line with the costs incurred. Revenues and costs from this transaction will be presented gross, but should be considered net, and we expect a positive effect of NOK 1 million-NOK 2 million per quarter from this development until project completion. Admin costs came in at NOK 50 million in the quarter, pegging towards south of 200 for the full year. Value changes on the derivatives were positive due to increased long-term interest rates, and I'll come back to the negative value changes in the investment properties later.
Rental income will, based on the reported events, decrease by 3% in Q2, mainly due to the sale of the Trondheim portfolio in the end of May, which gives only two months of income from Trondheim in Q2. And we have another column that reflects a one-off effect due to a lease buyout agreement, which Sonja mentioned, which will not be carried forward into Q3. So the decline from Q2 to Q3 is due to this one-off effect and NOK 67 million reduction from the divestment of Trondheim. And from Q1 2025, we have included a 3.5 CPI adjustment.
We have invested NOK 303 million in our property portfolio in the quarter, whereof NOK 91 million in our two new build projects and 170 million in the redevelopments and refurbishments. We divested three assets in the quarter, one in Bergen and two in Oslo, reducing the value of our property portfolio by NOK 973 million. Our property portfolio was written down by NOK 1.8 billion or 2.5% in Q1. The Trondheim portfolio was in Q1 sold 1% below book values as of Q4. It was not unexpected that the appraisers reduced the value of our properties in Q1. However, it's fair to say that the write-downs was higher than we expected when we reported last quarter.
In Entra, we have a consistent approach to valuations. Each quarter, we have a thorough process with at least two external appraisers, who estimates the current value of all our properties based on market data and updated information from Entra. And then we take the values estimated by the appraisals and include that in the balance sheet as the book values of our properties. Prime yields were, as mentioned by Sonja, flat in the quarter, but the discount rates were increased by an average 10% on several of Entra's assets and mainly on the secondary assets.
Currently, the portfolio net yield is 5.1%, up 124 basis points since peak valuation in Q1 2022, or 150 basis points when taking into account higher than expected CPI. And if the portfolio was fully let at market rents, the portfolio net yield would be 5.7%. Isolated, this increase would imply a negative effect on property values of 28%. But good operations, a strong netting, a strong letting market, and higher CPI has, had an offsetting effect, and the like-for-like write down for the period is 18%. However, based on the signals, signals we currently see in the market, we believe that the property valuations are at or close to the bottom. So over to the financing position.
Following the closing of the sale of three assets in Q1, we repaid NOK 900 million in bonds and NOK 600 million in bank debt. Further, we issued commercial papers of NOK 500 million at attractive terms. So the net repayment of debt was NOK 1 billion, and the debt at the end of the quarter was NOK 38.5 billion. Following quarter end, we issued two new commercial papers with a total outstanding amount of NOK 500 million. We did one one-month CP of NOK 200 million at 25 basis points margin and one eight-month CP of NOK 300 million at a margin of 65 basis points. And we are pleased to see that the CP market has opened up again.
The bond market is open, and Entra's spreads have come in 65 basis points since the end of 2023, significantly more than the other Norwegian peers. The bank market is open but selective. Good companies with long-lasting relationships with the banks, good assets, and good tenants are able to obtain bank financing in the current market. And we are working on improving our debt metrics, and we will see a significant improvement following the completion of the Trondheim transaction in May, where the LTV will be improved by approximately 4 percentage points and the ICR will be improved approximately 20-30 basis points.
But bear in mind, the LTV will be improved immediately after the closing of the transaction, but the ICR will, as the reported ICR is based on the last 12 months, the debt, the ICR will gradually improve the coming year, but we're definitely on a positive trajectory. Entra's average interest rates were stable from Q4 to Q1. For this exhibit, we have taken the forward curve, NIBOR forward curve, included existing hedges and terms of current loan agreements, and expected debt levels. That is assuming that the debt will be repaid after the Trondheim transaction, and assuming refinancing upon expiry at today’s market bank margins. The NIBOR forward curve is higher than the forward curve we presented in Q4, in the Q4 presentation.
But our interest rates are expected to fall sharply in Q2, due to the repayment of the most expensive debt following the sale of the Trondheim portfolio, which will lead to a significant reduction in interest expenses and an increase in the ICR. The de-leveraging will also have a positive effect on our hedge ratio from today's 60%-approximately 70%, which will give further predictability on Entra's future cash flows. We are finishing this financial update with our debt maturity schedule. In times like this, liquidity is key for asset-heavy companies like Entra, and we are very happy with our liquidity position.
We have very limited bond maturities of NOK 1.6 billion in the next two years, and we are continuously working on our rolling forward and extending our bank debt, and we have since Q1 2022 extended NOK 13 billion and raised new loans of NOK 5 billion. So to sum it up, we are very comfortable with our current debt maturity schedule, and we'll be even more comfortable after receiving proceeds from transaction of additional NOK 7 billion before the end of the year.
Thank you, Knut.
And then back to Sonja.
Okay, so a few closing remarks before we are ready for Q&A. First of all, the activity in the letting market is holding up well, and the demand for centrally located assets has remained strong. So low vacancies and limited new supply of offices provide favorable conditions also going forward, and also support prospects of continued rental growth in the long term. We are getting more comfort on outlook, both in respect of inflation and interest rates. Cuts are now expected to come in the end of the year and continue into 2025. And financing markets are opening up with yields tightening or credit margins tightening, and we are seeing positive signs in the transaction market.
We have a solid balance sheet in Entra with ample liquidity, and with the closing of the Trondheim transaction, our debt metrics will improve, bringing LTV down towards 50%, and also our ICR should get above two sometime in the third quarter. So we believe also that we, based on the signals we pick up in the market, should now be at or close to the bottom in respect of valuations, as Knut mentions, and the improving debt metrics will also start feeding into our results and our result margins going forward. So I think that concludes this from this presentation, and we'll just check with Tone if we have some questions.
We do have some questions. So the first one being: How do you expect occupancy to evolve in the near to midterm?
Okay, based on the very high activity we have in our letting, we are working very hard to bring it up, and our target is to try to get above 96% in the medium term. So we should see that it goes up in the months to come.
What is the current level of reversion in the portfolio?
Well, if you look at our 12 months rolling rent relative to the market rent, we are currently at 12% below market rents in Oslo, and some 11% on the portfolio as a whole.
Including Trondheim, the Trondheim transaction, the total divestments accumulate now to NOK 11.1 billion. This is above the communicated targets. Are you now finished with the divesting program?
We're very comfortable with the current situation, bringing our debt metrics more in line with our finance policy. However, we continue to work with the divestments of some non-strategic assets, and if we see that we get interesting pricing on them, we will progress on those discussions. So potentially some NOK 2 billion-NOK 3 billion more, but assuming then that we see that we get the pricing we are looking for.
Was this the final quarter with large changes in yields from the appraisers?
Well, well, as Knut said, we were a bit surprised that it came in at such levels this quarter. And, we do believe, based on the signals we see in the market now, that we should be close or at the bottom.
... What are your objectives in terms of LTV and ICR for the company?
Well, our finance policy states that we, over time, should be below 50% loan to value and have an ICR above 1.8. Now, if you take the more long-term perspective, we do believe that a company like Entra, with our profile of both long leases, high quality tenants, should move probably more towards somewhere around mid-50s. Sorry, mid-40s in respect of loan to value. And ICR would be happy to see it above 2.5 in the more long term.
Comparing rental income to the rental income bridge from Q4, what explains the deviation of NOK 5 million, low- lower rental income? You take that?
Yeah. The rental income bridge isn't an exact science, so it's... And it doesn't take into account all the effects that could be that will affect the quarter. So it's... So we're a few million NOK short than what the bridge we presented in the Q4 presentation, but that's more or less minor timing effects, so no big effects. And we're quite... There's no single item sticking out, and it's... Moreover, it's the deviation is less than 1%, and it's more or less as we expected.
Was the seller credit on Sørkedalsveien 6 of NOK 185 million paid down in the quarter?
Uh.
The seller credit, Sørkedalsveien.
Yeah, that will be paid in Q2, at end of Q2.
Thank you. That concludes the Q&A.
Thank you very much.
Thank you.
Thank you for joining us, and we'll see you again in the second quarter. Bye.
Bye.