Good morning all, and welcome to Entra's second quarter presentation here in Oslo. Let's move directly to some highlights in the quarter. Rental income came in at NOK 783 million. That's 30% up from NOK 602 million same quarter last year. Net income from property management of NOK 445 million, 20% up from NOK 370 million same quarter last year. Net value changes - NOK 857 million in the quarter. The result is mainly driven by the external appraisers having increased their return requirements in our property portfolio, although not yet evidenced in the transaction market. Leaving us then with a negative result of NOK 430 million in the quarter.
Key events. It's been a very high letting activity in the quarter. Happy to see that our net letting came in at NOK 64 million. We also had a very strong operational performance in the quarter, and pleased also that we were able to announce that we now are planning to start two new refurbishment projects in the third quarter, one in Nedre Vollgate in Oslo and one at Brattørkaia in Trondheim.
Moving on to operations, as I said, pleased to see that some of the leasing processes which we have been working on for quite some time actually materialized in new contracts in the second quarter, and we also continued to sign some contracts in July. It's been a very active quarter. We signed new and renewed leases on a total of 54,000 square meters with a rental income of NOK 134 million. Out of that, around NOK 62 million in our project portfolio. In total, contracts of around NOK 35 million were terminated in the quarter. Out of that, NOK 20 million was related to a contract with Amedia, which we now are moving into our project in Schweigaards gate 15. This left us then with a net letting of NOK 64 million in the quarter.
If you take a look at the list of largest contracts at the bottom here on the slide, you can see that the contract with Amedia was the largest in the quarter. This is again an evidence that we're very happy to see that the size of Entra enables us to solve the changing requirements of our customers within the portfolio of Entra. They will be moving from Akersgata to Schweigaards gate 15. We've also been helping them here with our advisory service, working with their workplace strategy. They have now signed 8,500 square meters and have an option to potentially increase with 700 square meters within the year if their workplace strategy concludes with them needing more space.
In Nedre Vollgate, a building we acquired from Oslo Areal, we have also signed a lease contract for 5,900 square meters. This is a building which we acquired with a vacancy of part of the building. It had been prepared for refurbishment, and happy to see that we now are able to sign lease contracts at attractive terms, enabling us to start the refurbishment also in the current market environment with increased construction costs. The three following contracts here are all renegotiations in the management portfolio, 4,900 square meters with Manpower and 2,700 square meters with the SATS and also slightly about 2,000 square meters with the Municipality of Bærum. Top right graph shows you the occupancy rate in the portfolio over time. It's been high and stable, currently at 97%. That's slightly down from 97.3% in the last quarter.
Now, in these slightly more turbulent times, our very high-quality tenant base with a long lease duration and also a well staggered lease maturity profile provides us with a very resilient and robust cash flow. Entra has a very solid tenant base, with approximately 57% of our tenants' rental income coming from public tenants. If you take a look at the list of tenants on the right side here, you can see our top 20 tenants representing around 44% of our rental income. The lease structure here is also very well diversified, where you can see that the largest tenant, the Norwegian Tax Administration, represent only 4.3% of rental income. This is again split across four different buildings and contracts. The second largest here, the Oslo Municipality, representing 3.9%, is split across 11 different buildings.
If you look at the pie charts in the middle here, you can see that our geographical exposure, close to 80% is located in the greater Oslo region. This is by far the largest job market in Norway, where we also have over time seen the most stable employment growth. We're pleased also to see that several of our largest tenants sign with us in also the other cities where we are located. At the bottom, you can see our lease maturity profile. The 6.5 years is well staggered, and we have approximately 10% of our rental income to be renegotiated every year for the next three years. This also provides us an opportunity to chase the market rental growth which we are seeing particularly in the Oslo market now. Finally, our contracts are 100% CPI linked.
Before we move on to these ongoing projects, I just say a few words on the current market environment in the construction market. The supply chain challenges we experienced through COVID were further challenged following the war in Ukraine, and this led to increased construction costs in Oslo, Norway. Now, the increase in material costs seems to have flattened out now. However, we've not yet seen any effect of that in the ongoing negotiations which we have with contractors. We do however expect that it will be a lag and take some time before we see these effects in the negotiations.
This means that the increase we're seeing in construction costs will have to be financed through rent increases. How much time it will take to bridge that gap will vary a lot dependent on the local market balance between demand and supply in each project's micro-market location. We were pleased to see that we this quarter could announce that we will start one refurbishment project in Oslo and also Trondheim, seeing that we had managed to get rental incomes slightly up to finance the increase in cost. Now, if you take a look at the list of ongoing projects, first of all, you can see that there's around NOK 1.9 billion left of CapEx. Out of that, Entra has already contracted approximately 75%.
We have sufficient cost buffers to handle the remaining within the estimated project costs. You can see that there's only one change, one green arrow on this list from the last quarter. That's related to the occupancy ratio in Schweigaards gate 15, where we, following the contract signed with Amedia, has increased occupancy from 34% to now 73%. We were also pleased to see that the rent levels we achieved here reconfirms that we will be able to maintain the profitability and yield on cost in this project, even though we increased the cost of this project in the last quarter. I'd also like to comment on our ongoing project in Trondheim, in Holtermanns veg 1-3.
We had hoped to see that we at this time would have reached a higher occupancy rate. We do, however, have several ongoing letting processes with high activity on this building. One of the tenants we have been discussing with chose to sign an intention agreement with us for the third phase in this project, where we've now working in an exclusivity period to formalize the terms and also reconfirm that we will be able to build the third phase within the estimated project costs which we have calculated in the current market environment.
Okay. A few words on the market situation. First of all, economic activity picked up very quickly in Norway after COVID. The increase in energy prices following the war in Ukraine and international sanctions has provided further stimulus to the already exceptionally strong Norwegian economy. Higher oil prices and gas prices have also increased the activity within the oil and gas sector. Now, for 2022, the central bank of Norway has put forward an estimated GDP growth of 3.5%, and employment growth is expected to be as strong as 3.3% for 2022. This is according to their latest monetary policy report, which was released in June. In the same report, they also estimated that the CPI for 2022 would come out at 4.6%, clearly also stating that there's uncertainty to these estimates. Just this week, we saw that the 12-month rolling CPI for June came in at 6.3%, clearly above expectations.
Now, if we move on to the commercial real estate market, Entra, so Entra has a consensus report where the 11 leading market specialists provide their estimates on rental development, vacancy, yield expectations, and also new build volumes. Here we can see that the expectations for vacancy is that it will trail down to 5.9%, and it's also already been fairly low for quite some time. From the bottom right graph here, you can see that the expected new build volumes coming into the market for the next couple of years is pretty limited. The increase in construction costs, which I already described, will probably also postpone some of the planned projects. This means that we will have a fairly tight supply side going forward.
On the other hand, we've experienced extremely high letting activity, both in the first quarter and also through the second quarter. This is also expected to continue going forward, seeing also that we have a fairly strong employment growth in the time to come. As a result of this, the market specialists have now an estimated rental growth in the Oslo market of 6.5% on average. However, some of the leading experts expect to see much higher levels, 10% and above.
The transaction activity was pretty high through the first quarter. The volume came in at NOK 50 billion for the first half of 2022. From the bottom right graph here, you can see that the transaction volume last year was extraordinarily high, around NOK 160 billion, while more normalized levels would be around NOK 100 billion, meaning that the first half was actually pretty normal. Now, there is currently concern among investors in respect of the volatility we're seeing in the debt markets and also increasing interest rates and credit margins. However, this has not yet been evidenced in expanding yields in the transaction market.
If you look at the investor environment, we recently saw that one of the leading experts came out with an investor survey where you could see that as much as 69% of all office tenants actually are still net buyers of office in the current market environment. The underlying interest for centrally located office buildings, particularly with a value-add dimension, remains very strong. According to the consensus report, you can see that our market consensus here is that yields are expected to expand towards pre-pandemic levels with some 30-50 basis points over the next two to three years. It's also fair to say that the low supply of new volumes coming into the market and the pressure on market rents should also have some balancing effects on potential yield expansions. I'll leave it to you, Anders, to go through the numbers. Thank you.
Thank you, Sonja. This has been one of the more intense half-year that we have seen. I mean, government bond volatility and credit spread soaring. We have the U.S. dollar at 20-year high. We have equities having one of the worst six months ever. We have equities and bonds correlating, something we haven't seen, actually hasn't been an issue since last time inflation was an issue. We do see recession warnings, including yesterday's inversion of the U.S. Treasury 10- to two-year bond. We see central banks stepping in to curb inflation.
In this environment, Norway stands out in a positive way. Norway has a solid GDP and employment growth. It's actually benefiting from the higher oil, gas, energy prices. We have a massive trade surplus, and we have a strong central government with the means and the willingness to act as they did in 2008, 2009, and also during the COVID crisis. For Norway as such, we're in as good a position as we can. Entra's second quarter results came in, as Sonja said, better than expected. Revenues were smack on, and costs, operating costs were a tad lower than expected. I'll just briefly go through the operational figures. There are two things that we will spend some time on. One is the value development or value changes, which was negative in the quarter, and also on the financing market, which is of importance for everybody at the moment.
Looking at the revenues coming in at NOK 783 million, so NOK 2 million above the first quarter, and a full NOK 181 million above the second quarter last year. Compared to the second quarter last year, NOK 139 million of the additional revenue come from acquisitions. We divested two assets, so we're down to a net of NOK 118 million. We have the projects, new projects coming into service since second quarter last year at NOK 49 million, and we took one asset out of operation, so a net of NOK 45 million. The last ingredient is the like-for-like, which came in at 4%, so at 1.1% lower than the CPI.
The reason for that is basically that we have higher vacancy now in signed contracts, tenants moving in, that is not yet included in the revenue figures. If we adjust for that, we're positive like-for-like, additional to the CPI. Not impressively positive, but still positive. Net income from property management coming in at NOK 445 million. Which is up from the 433 in the first quarter, and a full 20% above second quarter last year. You see the revenues go up by 30%. Net income from property management going up by 20%. The reason is higher interest cost in this quarter. Then we have the profit before tax at -NOK 413 million.
If you look at the second and the third quarter last year, we had value changes on the assets of about NOK 700-800 million per quarter. For the fourth quarter and the first quarter this year, we had on both quarters NOK 2.8 million in value uplifts. This quarter, we had NOK 1.04 billion with a downward value change or negative value change. I'll come back into that later, but that explains why we now have a profit before tax at -NOK 413. Cash earnings coming at 9.2%, so slightly up from the 8.8%. NRV at NOK 230, so we're down NOK 5 per share compared to the first quarter. NTA at NOK 227. Still, 15% CAGR since 2014 when we were IPO'd.
On the P&L, a few comments. Operating costs coming in at NOK 60 million, that is 7.7% of our revenues. That is lower than we expected. We said in the previous quarters, we would be happy or content or comfortable around mid-8% of revenues. There will be some quarterly fluctuations from quarter to quarter, so this quarter is unusually low. You have net revenues and our net other income, other costs at NOK 4 million, basically pretty normal. Admin costs coming in at NOK 44 million. Also a bit lower than we initially expected. We expect to end up slightly north of NOK 200 million for the year. Please bear in mind that we had NOK 14 million in extraordinary admin costs in the first quarter this year.
Well, I'll come back to the financing cost later, and the value changes. We have tax payable of NOK 21 million. We have the normal NOK 4 million from one of the subsidiaries where we're not able to offset our tax loss carry forward in the group, as this is a partly owned company. We had a one-off tax payment this quarter of NOK 17 million. This is a case that stems back from 2019, where we had expected to spread the tax for 15 years in line with the contract that we made back then, and the tax authority decided otherwise. We decided to accept that, call it a verdict, and pay the tax now.
It's basically a timing effect. We would have paid it anyway, but instead of paying it over 15 years, we will pay it now for this quarter. Otherwise, there's nothing really that stands out on this P&L. In looking at the rental income bridge, basically saying, how does revenues look like in the next six quarters, basically taking all public information into account. As you can see, the only thing that's from this quarter to the next is basically the introduction of St. Olavs plass 5, one of our redevelopment projects that we'll put into operations in the third quarter. We see revenues slightly ticking upwards towards NOK 800 in the Q4 and then coming up to about NOK 850, NOK 860 during 2020 or in 2023.
In this, call it forecast or overview, we have put in 4% CPI. Given what we learned yesterday with the CPI at 6.3% June to June, that is probably on the conservative side. There's some upside on that one, but we will update that on the third quarter presentation. Going into the property value development, that's where we go to the value changes. It's called a normal investment of NOK 681 million on the quarter. We have the negative value changes of NOK 1,040 million.
We have tried to show that on the waterfall graph to the right. You can see that the three sort of normal ingredients, net letting, market rent, and projects coming in at NOK 142 million as a positive. We have two negatives. We have a -NOK 200 million of estimated higher CapEx on the management portfolio going forward. Please bear in mind that Entra do our valuations on all assets quarterly by two external appraisers, and we take the average of those two appraisers into our books. So, there's nothing. This is not our own, it's basically external assessment of it. So that is a bit different from what we see many other real estate companies do. That additional CapEx of. It's roughly 8% increase, basically takes the value of our portfolio down because we have higher CapEx than previously expected.
I think that basically pretty much reflects the construction market as we have seen it over the last three quarters. The appraisers are basically catching up with that, the cost increase. We have the, what now says is the yield effect. Sonja said it in her part. We have not seen any evidence in the transaction market that yields have come up. Transactions are continuing, and we do see sort of the normal or old price levels still in the Norwegian market. There is interest on different assets. What we have seen here is that one of our appraisers decided not to change any return requirements, while the other appraiser took up the return requirement of 13 BPS in Oslo and 25 BPS in the other cities. That has led to the negative value change of NOK 980 million for this quarter.
I'll move into the financing part, which is I'll spend three exhibits on that one. Debt of about NOK 40 billion spread pretty evenly between bank and bond debt. As you can see on the graph to the left, 46% of that is green funding. We have an LTV at 49%, slightly up from last quarter, and ICR at 2.7. The LTV is the EPRA definition. If we use the Moody's definition, we're at 47%. On the financing market, we use three sources: CP, bonds, and bank. On the CP market, we see that it's still open. It's less liquid. We did. We rolled about NOK 600 million in the quarter, most of it during May, and then we did that at an all-in cost of 2.3%. That market is still available, it's still there, but we feel it's less liquid than previously.
The bond market has seen material changes during the last half year. We see spreads widening out. For some real estate companies, massive widening out of spreads. Normal five-year spread on an Entra bond would be between sort of 70-80 basis points. If we did a five-year today, the estimate from the market is a margin of about 200 basis points. Significantly more expensive for us, but still significantly cheaper than what we see in most other real estate companies in the Nordic sphere.
We do have interest in Entra issuing bonds. We have incoming calls from investors saying, "We would like to invest in Entra." We have so far decided not to go there due to the current spreads. We rather like lower spreads than higher spreads. The market is still there, and it's still open for Entra. Banks are becoming more and more important. Companies with long-term relationship with their banks are in a more favorable position than those that do not. Entra has been with our five partner banks for as long as we can remember. We've been working with them for 20 years. We are comfortable that also the banks will provide a sufficient and competitive funding provided for Entra going forward.
On the last part of this exhibit on the right-hand side, we have by using the appraiser's valuation models tried to show what does it look like with an increase or on the yield on the x-axis, basically a percentage points up, and what is the mitigating factor that additional rental income will provide or market rent increases will provide, including CPI. As you can see, as we move out towards NOK 230, the starting point for NRV and 49% as the LTV, we use the EPRA definition, not the Moody's definition, by the way. That will have a negative impact on our balance sheet and our key figures. As you can see, the mitigating factor of higher rent or higher income and CPI growth is quite important. You can see for yourself that it has a not a full balancing effect, but at least a large offsetting effect on the negative effects of the yield increase.
Going over to the interest rate. This graph shows the average nominal interest rate for Entra as of quarter end. Our, I mean, our interest cost is basically based on two factors. There's a base rate or the NIBOR, and then the margin. When we're looking at the base rate for... it's about 50% hedged. If we take the time to maturity on the hedged portfolio, i.e. That part that is hedged, we have a five-year term to maturity. If we include the full portfolio of debt, the term to maturity, time to maturity is 2.8 years. That is the bottom part, the NIBOR part. We have the margin, and that has a fixed term to maturity of 2.6 years. Clearly, all the bonds and the CP are fixed for the duration of the instrument.
The bank debt, the margin is secured. It's a mix from five years and down to sort of 14 days. On average, it's a 2.6 years time to maturity on the credit margin as well. The graph shows sort of what will Entra's cost of debt be going forward or historically and going forward. We have used the forward rate, we have used the existing hedges and the existing debt portfolio, and we have assumed that the margins will remain the same as they have been. That is one important distinction. That takes it up to NOK 347 in the first quarter of next year. You see the cost of debt trailing down slightly as it follows the forward curve, NIBOR three-month forward curve.
What if we refinanced all debt falling due the next two years at sort of market margins now, which are higher than what we have currently, that would take up our average margin by somewhere between 5 and 10 basis points. There is no material uplift in the cost of debt, even though we should refinance the debt that matures in the next two years.
Finally, we'd like to show you the maturity profile on our debt. Q2 and Q3 last year, we issued around NOK 11 billion of new bonds, long-term bonds, and we bought back about NOK 4 billion, which has made this maturity profile, which we find very favorable. There is limited debt maturing in the next twelve months, total of NOK 3 billion. We have NOK 3.2 billion in undrawn RCFs to cover that. The total term to maturity on the debt portfolio is 4.2 years. Finally, Entra do not have any sort of hybrids or pref shares or D- shares or those kinds of instruments . What you see in Entra is really what you get, and we like this maturity profile a lot. Thank you.
Okay. Thank you, Anders. So a few closing remarks before we go to Q&A. First of all, the Norwegian economy is solid, and it has proven very resilient through previous challenging market environments. Secondly, the transaction market has held up very well through the first half of 2022, in spite of pressure both in inflation and interest rates and credit margins. Thirdly, the activity in the letting market has been extremely strong and the tight balance on supply and demand also provides a positive sentiment for market trends going forward. Finally, Entra has a very strong balance sheet, solid balance sheet with well staggered maturity profile and also an average time to maturity of 4.2 years. I think that leaves it for now, and I believe we do have some questions, Tone. Anders will join me up here, and we can start with the questions.
Okay. The first question. Your LTV of 49% is higher than the 45% that your current credit rating requires you to have over time. How are you planning to reduce your LTV, and what are your options?
On the credit rating part first, we have a Baa1 rating with stable outlook from Moody's, equivalent to the BBB+ from S&P. The definition of LTV in Moody's is slightly different from the EPRA LTV definition. When we give, say, 49%, that would be 47% in the Moody's calculation. As the question stated, there's a 45% sort of trigger on the Baa1 rating from Moody's. In addition to the LTV trigger, there's a number of other factors that Moody's look into. They look at the business fundamentals, they look at the ICR, look at liquidity, they look at public tenants. I mean, they take a holistic view of the company.
When we acquired Oslo Areal back in, w ell, signed in December, closed it in January, we knew that our LTV would slide above the 45% threshold. When we discussed that with Moody's, they gave us an 18- months grace period to put sort of all triggers into the right place. That said, at 47% LTV trigger or at 40% LTV and other factors being on the right side, there's always a judgment call from Moody's, and we are discussing with Moody's on that. We have noted that there are increased focus on the commercial real estate sector in the Nordics and Scandinavia, and there has been some rating changes for some other companies, and we are discussing that with Moody's as well on us.
It's only fair that they will review our situation in light of the recent market conditions. The LTV as such, being above 45% is not sort of a major trigger point. The second part was how we plan to take the LTV down. Let me take it conceptually first. I mean, there aren't that many ways to take the LTV down. You can sell assets, or you can raise equity. Those are basically the two triggers. We do not have any plans to raise equity. Any real estate company would evaluate the sort of asset rotation and acquisitions and divestments of assets, and that is also part of our toolbox, so to say.
I think it's fair to say that that's always something that is on agenda, and we will look into any acquisitions or divestments, in this case, as if that is a good opportunity for us. But clearly, Entra's value development is in the project development part and, for example, when Sonja mentioned that is NOK 1.9 billion left of CapEx in the portfolio. When we look at the value creation in those projects alone, that should be close to almost NOK 1 billion. Those projects are very profitable, and it should give or take about 25% margin on those and that will also help us getting the key figures into place.
Well, having said that, we also planned for doing some asset rotation when we did the acquisition of Oslo Areal, so that's clearly on our agenda.
Yeah.
Are there any projects that are going to be postponed because of the higher cost environment?
Well, as I highlighted in my presentation, we will have to see that we can mitigate the increase in cost through higher rents and we'll have to assess that on a project-by-project basis, basically seeing if we can manage to get higher rents and how much time it will take. Maybe you'd like to add something.
I think. When we start up new projects to add, it's basically part would be new builds, and part would be major redevelopments.
Yeah.
On the redevelopment part, we've been through the last two years a very active and sort of high-intensive pro-development, and that is pretty much done now. In our pipeline, there aren't that sort of many large redevelopments needed. In that, we have flexibility in terms of running the assets longer than we could, like we otherwise could have.
Mm.
It gives us optionality and flexibility.
Mm.
In terms of the new builds, it's clearly on a case-by-case basis. I mean, we do projects when it's profitable for us. I mean, we don't wanna do negative projects. That's why it's. That's also what we see in the market with the fairly low expectations on new builds in the market in Oslo going forward. Because the real estate developers, they want to see profitability, and that means basically rather wait for rental income to pick up to defend the higher costs.
Yeah.
Yeah.
What is the long-term financing of Oslo Areal going to look like?
Long-term financing Oslo Areal. When we financed Oslo Areal, that was a NOK 13.5 billion transaction. That was done purely bank financing. We had a 2.5 bridge loan, which was 18 months, that we actually extended with another 12 months in this quarter. That's part of the, sort of the solution. It's not long-term, but it's medium-term. Then we had went to four of our banks and secured another NOK 2 billion from each of them. The average term to maturity on the bank financing we got in Oslo Areal was 2.9 years, which is now extended somewhat towards 3.4-3.5 probably with the extension of the 2.5.
In that way, we are in the short and medium term, we're comfortable with the financing of the acquisition. Clearly, I mean, now we have a 50-50 split between bonds, commercial paper, and bank. Normally we would like to see 75-80% in the bond market and 20-25% in bank market. Our long-term plan would be to roll part of this bank debt into bonds. But that is not an option on the current market, sort of market conditions with the credit spreads up to, like, 200 basis points.
Mm.
Yeah.
You mentioned margins and all-in costs on commercial paper and bonds, but what would you say the all-in cost of bank debt is currently?
Really, that is ongoing negotiations with our banks, and I think it would not be fair to the banks and not smart of us to discuss those margins. What we previously have seen is that the bond market was more favorable than the bank market in terms of credit spreads or credit margins. Currently, the bank margin or bank margins are more favorable than the Entra bond margins, which also is reflected by the funding cost of the other banks. I mean, also the bank cost of funding have come up and that will be reflected in our bank funding as well. That only would apply to the new bank financing. We had...
I mean, we have now NOK 20 billion, give or take, of bank funding plus the NOK 3 billion in undrawn RCFs, and there has not been any discussions with any of our banks in stepping up the margins on the existing debt. We're only talking about the new debt that we might secure into the autumn. Sorry, we are. I think it wouldn't be right to disclose those kinds of ongoing negotiations with our five dear partner banks.
The final questions. Higher yields haven't been seen in the market. Do you think that this is a lagging effect? Is the fact that you took one of the values increase in yields into your books because you assume that expansion will happen in the transaction market?
Say, please say one more because there were two questions in one there, so I just need to sort my thoughts.
The higher yields haven't been evidenced in the transaction market. Do you think that this is a lagging effect?
Okay. Let's take that one first. I'm getting old now. In terms of when we're looking at what drives yields, clearly the cost or the interest cost is a contributor. I mean, there has to be some parity between the source of funding costs and the actual yields. When we look at sort of the mega data on this, it's actually more. In the regressions, it's actually more to do with liquidity into the market than the actual net cost of debt. Just sort of a sidestep, but that is a sidestep. There has to be parity between long-term cost of funding and the real estate yields.
If the existing interest rates schemes continue, it's natural to believe that would have an impact on yields also going forward. When we're looking at the I mean, the expert or the real estate specialists, they're saying it's 29 basis points up this year, another 18 basis points or 19 basis points next year. That was sort of their best estimate on what's gonna happen. When looking at the stock market with I mean median Nordic real estate stocks going down 40% from the NAV, clearly, it's a discount of a yield expansion of more than that. I mean, who's gonna be right? It's difficult to assess, but gravity also works in the real estate market.
If cost of funding goes increasingly up, that means also cost of equity will go up, and that will have an impact on the total return, which again should impact the yields. But there are some mitigating effects in real estate, which are most clearly the CPI and the market rent growth. There is sort of very good dynamics on that. It will not offset it's our best estimate, but it will at least mitigate it to a sort of medium to large extent. Second part of the question. Yeah, please.
I think you've more or less covered it, but is the fact that you took one of the values increase into your books because you assume that this expansion will happen in the transaction market also?
No. As Sonja made it clear as well; there is no evidence in the transaction market today that yields have come up. That is an expectation from one of the appraisers. In terms of how we handle our books, as also I stated, the two external appraisers value each asset every quarter on a DCF basis and make their own assessments of each asset. We take the average of those two assessments and put into our books. That is a principle that we have been using since 2014, when we were IPO'd. The only time we did not take that into account was during the first quarter of 2020 or second quarter, I can't remember now, or its first quarter.
During the COVID-19, when actually the appraisers wrote up our books by NOK 2 billion. Then we said, "Well, that is probably a bit too optimistic. We'll put it as zero for that quarter." I mean, Entra, we want to be a transparent company. As I said, what you see is what you get. I think that is the especially in turbulent times like this, it's the only thing to do is to sort of respect the.
Market
The sort of the appraiser's view on the market. We can disagree or not agree, but we have to respect it.
Good. Okay. Thank you.
Thank you all for joining us.