Good morning, all, and welcome to our first quarter presentation. Let's start directly with the highlights: rental income of NOK 774 million in the quarter. That is NOK 104 million below same quarter last year. When adjusting for divestments, the underlying rental income growth was 2.6%. Profit before—sorry—net income from property management of NOK 320 million in the quarter. That means that the lower interest costs have more or less offset the negative effects of rental income. Value changes were -NOK 32 million in the quarter, mainly from financial instruments, leaving us then with profit before tax of NOK 280 million in the first quarter. Our net asset value increased to NOK 163 in the quarter, and the debt metrics continued to improve this quarter, with our ICR now above 2.0x in the quarter.
We were also very pleased to see that we have had a very active quarter in respect of financing and placed bonds of NOK 3.1 billion in the quarter, and closed also bank financing of NOK 1.7 billion, enabling us then to extend the debt maturity to four years this quarter. Our net letting came in with a negative of NOK 73 million this quarter. If we move on to a few words on operations, the gross letting in the quarter was at normal levels, with NOK 98 million of signed leases this quarter. The gross letting was, however, offset by terminations, with annual rents of NOK 117 million in the quarter, leaving us then with the negative net letting of NOK 73 million.
Our occupancy is currently at 93.8%, and out of the terminations, around 25% of these is related to different public tenants terminating as they are being co-located with other public entities, and another 25% of it approximately is related to the restructuring of two leases operating within the co-working and conference and event space. As I have commented on in previous quarters, we see no fundamental changes from working from home in Norway. However, there are some aspects affecting us in the short term. First of all, tenants are, to a larger extent, rethinking their workplace solutions when coming out of long leases. This means that lease extensions as is is much less common, and this also means that our tenants are more open for looking into alternatives in the market, and we are operating in a more competitive environment when working on renegotiations.
Secondly, the employment growth we have seen in the Oslo region the last year has predominantly been within the public sector. Public sector are increasingly looking for opportunities to cut costs through co-locating, through moving to less expensive areas in the city, and also transitioning from one fixed desk per employee policies to free seating with underutilization. This has been going on for some time, and in the more expensive part of the city, we have already replaced the majority of our public tenants with high-quality private tenants. However, currently, the employment growth is not strong enough to compensate for this ongoing transitioning in the public sector. This should, however, improve with an expected pickup in economic activity, also supported by future interest rate cuts.
We have the right locations, we have attractive buildings and products, we have put in place the resources required to work on the letting, and we are confident that we will bring the occupancy up to our targeted 95%, but also realistic that it may take some time. Just also, before I move on, I wanted to comment on the announcement earlier today that we also signed a lease contract with Yara of 11,200 sq m, and at the same time then have terminated the lease they signed with us one year ago in a neighboring building at Skøyen. This means that we now are back to the deal we originally wanted with Yara, namely prolonging their existing lease in their current headquarter location.
This was not an option one year ago as they had outgrown the building, and we were pleased at that point of time that we could provide an alternative within our portfolio. Now, however, we see that this is a good deal for us as we can extend the lease for NOK 10 million without putting in any CapEx in that building. The space they now terminate in Skøyen Atrium is one of the most attractive multi-tenant buildings at Skøyen. It should be suitable for a wide range of tenants, and we expect we should be able to also relet that space with less CapEx than what would have been required for the Yara deal. This Yara deal will also have a net letting effect with a negative of expected NOK 25 million in the second quarter.
It will potentially also increase our EPRA vacancy in Q1 when the existing tenants move out of the space Yara was supposed to—we were supposed to prepare for Yara. These effects are, however, already fully reflected in our rental income bridge, and it will have no cash flow effects in 2025-2026, as this has already been reflected in the income bridge, as I said. Now, based on what we see now, we had expected to see that we would be able to have a positive net letting in the second quarter, and that is then, of course, before we include the effects of this Yara deal. Clear improvement in net letting in the second quarter is expected.
If we move on to our ongoing projects, they are progressing according to plan, and based on the ongoing letting activity, we expect to see the occupancy come slightly up in our project in Bergen in the second quarter. In Sandvika, we have increased the cost of this project with NOK 17 million, as we have found it appropriate to replace more parts that we originally had planned to reuse, and also we have had some unexpected costs with the building permit requirements. With this increased cost, the yield on cost will be 4.9% on that project, down from 5.3%. The remaining CapEx for these projects is now around NOK 600 million. We continue to have a very disciplined approach to capital allocation, prioritizing projects now related to enhancing the letting in the management portfolio, and we expect to start reporting on one refurbishment project next quarter.
In these times of more uncertainty, we are, of course, very pleased to have a high-quality tenant base, which provides both stable and reliable cash flow. Entra's tenant base consists, as you can see, of around 50% revenues from public sector, and the private tenants are also well diversified across different sectors, with consulting services and IT as the largest stake within the private sector. You can also see that we have a large diversification amongst our top 20 accounts, where these clients represent collectively a total of around 50% of our revenues. Now, operating our business in a sustainable manner is a strategic priority for Entra and also a prerequisite for our long-term value creation, as also it is one of the enablers for our green financing.
We have now reported according to the E.U. taxonomy framework for two consecutive years, and 100% of Entra's revenues and CapEx is taxonomy eligible. In 2024, our taxonomy alignment was at 54% on revenues, up from 47%. On CapEx, the share is lower, which also is, of course, natural as quite a few of the CapEx projects have been initiated before the taxonomy framework was ready. We can also see that we screen fairly well relative to other real estate companies reporting on the Stockholm Real Estate Index, as you can see on the exhibit on the right side, where the average is around 31% alignment on revenues. If we move on to a few words on the market situation. Now, despite the global market volatility, Norway's economy remains solid and stable.
With less than 2% of our mainland GDP from exports to the U.S.A., the direct implications of American tariffs are minimal. However, as a small open economy, we are, of course, exposed to all indirect effects. Now, supported by the Sovereign Wealth Fund, Norway is well positioned to support and stimulate its economy, as it has also proven to do in the past. Additionally, the Norwegian Central Bank has yet to initiate interest rate cuts, so monetary policies remain available as an effective tool to stimulate the economy. The CPI came in at 2.6% in March, following an unexpected spike in February up to 3.6%, which then also prompted the central bank to delay the anticipated rate cut in March.
This means that the key policy rate has been now held at 4.5% since December 2023, and the central bank now expects that we can see two rate cuts of 25 basis points this year. Market expectations are that we will see between two and three cuts. The employment growth has been slightly on the positive side through this cycle and is expected to remain positive also going forward. The economy is expected to pick up as lower interest rates and also the solid real wage growth we have seen last year and also expected for this year starts feeding into the economy in time to come. The letting activity was very active in 2022 and 2023, also feeding into the first half of 2024 before it slowed slightly down after the summer last year.
This was partially also explained by the fact that we could see that there are less lease expiries in the Oslo market in 2026. Although the leasing activity slowed down a bit in the second half, we have seen improvements this first quarter with increasing activity and also some more lease searches coming out into the market. We are also aware that there are quite a lot of volumes which are set to expire in 2027, suggesting that we will also see increasing activity throughout this year, although, of course, the heightened market uncertainty may lead to delays for some of these tenants. If you look at the vacancy graph at the top right, you can see that the overall vacancy currently is around 6.5% in the Oslo market, according to our consensus report, and expected to increase slightly towards 7% going forward.
Both in Oslo and Bergen, the vacancy varies between 6% and 8% in most clusters in these cities, but you also see that vacancy is higher in some parts where you have typically older building stock or also in certain fringe areas. Now, most of the vacancies in areas with small space where you also have increased sub-lease volumes typically in times with more uncertainty, and the competition in this segment is therefore quite strong. From the bottom right graph, you can see that there is limited new supply coming into the market. Around 200,000 of the volume coming in in 2025 and 2026 is related to the first part of the government offices and the Construction City.
Both of these projects are close to fully let, and the buildings they will be vacated will partially be expected to take out for refurbishment and back in the market after 2027, and part of it is probably also going to be converted to hotels or resi. The moderate new build supply and also the current dislocation which we are seeing between market rents and break-even rents for new build projects means that we expect also to see rental growth going forward, probably also above expected inflation rates. This is also supported by our consensus market report, where you can see that they at the top right expect around 12% growth in the next three years. In the short term, however, we expect to see a more moderate rental income growth after some quarters with low activity in the letting market and also more intensified competition over leases.
If we move on to the transaction market, it has remained active in the first quarter. The financing markets are open and available. However, the lending sentiment is more selective due to the increased market volatility following the rise of international trade tensions. The activity was very high coming into the quarter, and we have seen transactions for a total of NOK 15 billion close in the quarter, which is quite decent, with a broad universe of buyers, both equity buyers, family offices, foreign buyers, and also private equity. Following the increased volatility now in the later weeks, we do, however, expect that the market will be a bit more wait-and-see mode until we get some more clarity on where things are going.
The prime yield is currently around 4.6%, and as you can see, the expectations are that they will remain stable there this year, and expectations that they will decline in line with interest rates going forward. The expectations for yield compression have been reduced slightly compared to what we saw in the last consensus report. Sorry. Ole, a few words from you.
Thank you, Sonja. In Q1, the financial performance was stable compared to previous periods. As you are aware of, in Q2 2024, we divested our Trondheim portfolio. For comparison purposes, we have marked out the Trondheim impact on rental income in the graph to the left. Rental income came in at NOK 774 million in the quarter, which is more or less flat compared to NOK 776 million in the first quarter 2024, adjusted for the Trondheim divestment.
We had a positive contribution from CPI of NOK 17 million, as well as a positive contribution from the project portfolio of NOK 12 million. This was offset by divestments in addition to the Trondheim portfolio, which had a negative impact of NOK 22 million, as well as a negative like-for-like of NOK 9 million in the quarter. Adjusted for all divestments, our underlying growth is 2.6% in the quarter.
Compared to the fourth quarter of 2024, our rental income grew from NOK 767 million to NOK 774 million. However, this is NOK 9 million below what the bridge highlighted in our four-quarter presentation. The reason for this is mainly related to two items. First, we had the restructuring of a lease contract, where parts of the lease were converted to a turnover-based contract. Secondly, we also had another event and conference tenant, which is in restructuring, as Sonja mentioned earlier.
Net income from property management came in at NOK 320 million, and this is slightly down from NOK 325 million in the first quarter of last year. The loss of revenues from all the divestments was partly compensated by less interest costs due to lower debt levels, as well as lower operational costs. Profit before tax came in at NOK 280 million, and this includes negative value adjustments of NOK 32 million in the quarter. Moving then to our—sorry about that. Okay, heard on? Yes? Moving then to our profit and loss statement. I already gone through the rental income, but I will give you some flavor on the other cost items. Our OpEx came in at NOK 66 million, which is 8.5% of the rental income. This is in line with historical levels.
The OpEx is down from NOK 78 million in the first quarter of 2024, and this is due to the mentioned divestments we talked about earlier, as well as strict cost control. Admin costs came in at NOK 47 million, which is down from NOK 50 million in the same quarter last year. This is in line with expectation, and we have previously highlighted that we target admin costs for the full year at around NOK 200 million. Net realized financials came in at NOK 349 million. This includes NOK 11 million from one-off costs related to the bank refinancing we conducted in the first quarter. I will come back with more information regarding the bank refinancing later on in the presentation. The net realized financials is also NOK 79 million below what we reported in the first quarter of 2024.
The lower interest cost is mostly due to reduced debt level with nearly NOK 7 billion following all the divestments we have completed. Also, our interest rate on net interest bank debt is about 30 bp s lower than we had in the same quarter last year. I will also come back later on in the presentation with the net interest costs going forward. As you can see, we had limited impact from value changes both in our properties as well as our hedge instruments, and this gave then a profit before tax in the end of NOK 280 million. Moving over to our per-share data. Cash earnings came in at NOK 7.1 per share in the first quarter. This is flat compared to the fourth quarter.
While on the right-hand side, you can see the net asset value continued a slight improvement in the quarter and came in at NOK 163 per share from NOK 162 per share in the fourth quarter. In addition to this, we have distributed NOK 37 in dividends since the IPO in 2014. Adding this, the total return has averagely been 9% since the IPO. Moving then over to our rental income development. Looking forward, the model indicates that the rental income will be NOK 771 million in the second quarter, slightly down from NOK 774 million reported in the first quarter. The Q2 rental income is, however, NOK 10 million below what the bridge highlighted in our fourth quarter presentation.
This is mainly a spillover effect from the two special situations, which also impacted the first quarter, as presented earlier, as well as some other negative impact from the negative net letting we had in the first quarter. The negative net letting we now had three quarters in a row is lowering the rental income trend, as you can see in this graph. However, this graph is not a guidance. It just highlights the income trend based on existing contracts and reported events. There is significant upside potential to the rental graph going forward, especially in the latter part, and we are obviously chasing these potentials. The most important value drivers here are to rent out existing vacant space, which has a potential value of NOK 216 million.
In addition to this, we also have available space in the ongoing project portfolio, which has a potential value of NOK 44 million per year. Lastly, we obviously also target to relet the space that will be available in the future due to the negative net letting we have had now three quarters in a row. Moving then over to our property value, which increased to NOK 63.0 billion in the quarter. The value changes in our investment properties were flat in the quarter, with an insignificant reduction of NOK 6 million. There are limited movements in all value drivers in the quarter, and the deviation between their pressures is relatively low, and this has also come down over the last two to three quarters. As Sonja mentioned earlier, the valuation looks to have bottomed out, and yields are expected to come slightly down over the next few years.
CapEx came in at NOK 385 million, which is mostly related to the four projects that we report on and are ongoing at the moment. We will continue to have a disciplined investment strategy given the current interest rate as well as rent levels. The decision to renegotiate Yara is also partly driven by being more CapEx conscious, as in this case, the tenant will remain in the same site with an as-is lease with no CapEx for us. Lastly, you can see that the portfolio net yield is at 4.86%. Moving then over to our debt metrics, which continued to improve in the quarter. On the left-hand side, you can see the interest coverage ratio has bottomed out and improved from 1.91x to 1.98x in the quarter, measured over the last 12 months. Isolated in Q1, the ICR came in at 2.07x.
On the right-hand side, you can also see that the leverage ratio also improved slightly with a 0.2 percentage point and came in at 49.1%. The net debt -to-EBITDA was flat at 11.7x. We expect to continue a gradual improvement in our debt metrics going forward, and this is supported by continued capital discipline as well as potential value increases and lower interest rates. Moving to our financial position. In Q1, we have created a solid financial platform and extended our average time to maturity of our total debt from 3.1 years to 4.0 years. We have done this by issuing NOK 3.1 billion in new bond debt at attractive terms under a new loan agreement, as well as refinanced NOK 17 billion in bank debt. Thereby, we have increased our financial resilience in the current volatile market.
As you can see in the graph to the right, we have NOK 9.4 billion in undrawn credit facilities that falls due in 2028 and 2029. With that, we have ample liquidity room for the next 24 months. 62% of our debt is now green financing, and we have the capacity to issue more green debt if required due to our existing environmentally friendly asset portfolio. Lastly, you can see that Moody's affirmed our rating and outlook in April. We will continue to have a conservative approach when it comes to leverage, as well as interest rates going forward. To have good access to the bond market, we will maintain an investment-grade rating throughout all parts of the cycle, as we have done in the past.
With now a new bank debt structure in place, as well as a gradual improvement in credit metrics and continued to be capital disciplined, we believe that we have set the path for a rating upgrade in the future. Moving then to our cost of debt. We have had some questions regarding our interest rate going forward. To give further transparency, we have then reworked our cost of debt slide. The interest rate on our interest-bearing debt came in at 3.89%, as you can see in this graph. However, we do have other financial costs that add to the net realized financials, which we report in our quarterly report. The all-in net financials came in at 4.44%, but this included one-offs related to the bank refinancing, which impacted 14 basis points.
As you can see in this graph, the gap between the interest rate on our interest-bearing debt and the net realized financial has increased since late 2023. There are several reasons for this. First is that in 2021, we issued several bonds at a discount, which reduces the interest on our interest-bearing debt, but adds a non-cash amortization. Second is that we have increased commitment fees in the period, as we preferred to have a significant liquidity buffer while we were renegotiating with our banks. This has now been completed in the first quarter. Lastly, due to much higher project activity in 2021 - 2023, we capitalized much more interest cost than we can today due to a lower project activity. These three elements offset each other from 2021 - 2023, but not so much from late 2023 and onwards.
Going forward, we do expect this gap to gradually be reduced due to a combination of lower commitment fees as well as reduced amortization of bond discounts. Seeing that we have had several questions on our interest costs going forward, as well as that we have reworked this slide and a new bank facility, refinanced our bank structure, we will give you an indication of net realized financials going forward in this quarter. Based on the current NIBOR forward curve, our existing hedge positions, as well as our expected credit margins, we forecast a net realized financials in 2025 of NOK 1.33 billion and NOK 1.27 billion in 2026. However, this may change due to shifts in NIBOR curve, investments, and other factors. With that, Sonja, I leave it to you.
Do we have sound on this one? Yes. Okay. Closing remarks.
First of all, we are operating in a very solid and stable Norwegian economy, and the public spending will continue to stabilize the economy. Lower interest rates and real wage growth is also expected to stimulate the economy going forward when we get our first rate cuts, which still are anticipated to come in 2025. We have established a very flexible platform for our long-term financing with the great job which has been done through the year and concluded this quarter. This also provides resilience and the capability to get financing from where we find it most attractive going forward. Our high-quality tenant base provides also stability in respect of cash flows.
We continue to see promising letting market fundamentals and expect also that we will see letting market activity pick up, knowing that there is quite a lot of leases to be extended in the market in 2027. Of course, also a bit depending on how the economic sentiment evolves. Break-even rents for new builds above market rents continue to support also that we should see rental growth over time. There is now quite a bit of upside in our portfolio. We continue to work hard to deliver on growth opportunities within the reversion potential and the vacant space in our portfolio. In addition, the projects and CPI will contribute with income growth going forward. I think that concludes the presentation for now, and we should be ready for some questions.
Yes. Thank you, Sonja and Ole.
Our first question is, Entra has now seen three quarters of consecutive negative net leasing. When do you expect the operational environment to improve?
That's a good question.
I think it's firstly, as I just said, we know that there is quite a lot of lease volumes in the market to be renegotiated in 2027, which implies that the letting activity should pick up. Having said that, the most, also the recent increased uncertainty also often prompts tenants to delay decisions. The effects of that, we don't know yet. Our expectation is that we will see a pickup in the activity in the letting market, which should definitely help improving also the operational environment. Now, if you look at our portfolio, we have in total around NOK 30 million of lease contracts in 2025 and NOK 80 million in 2026, which yet have not been concluded.
The outcome of these are still open. The remaining part of the portfolio or the expiries have either already been terminated or we expect to see them re-signed. The volume, which is still at risk, you could say, is quite limited and below 20%. That should also provide some clarity that there is limited downside and quite a lot of upside for us now in our letting business.
Thank you. Next question. Can you please reconcile the comment that the work from home trend has reversed, but tenants are reassessing their office requirements due to hybrid working?
Yes. With that, I mean that when our tenants now are in a situation when they are renegotiating, they are coming out of leases which are 7 - 10 years long. The way we work has changed over these years.
It means that we use more space for meeting rooms, Teams rooms, and collaboration space, while individual desks can be reduced. When you are in an existing office contract, you need to a much larger extent to do some kind of alternations. When you are looking into what kind of alternations you have to do, you are at the same time also more open to looking at alternatives because it is one thing to kind of sit in the existing building and experience that we are doing refurbishments while the tenants are in the building. The alternative for them is maybe then just to move into something new or in another building. When you look at the presence in the office, mobility data, people are back in the offices, but the time of the week we use the office is a bit different.
The organizing of the office and what kind of facilities you need has changed.
Thank you. How do you expect occupancy to develop going forward?
I think that we, for the second quarter at least, expect that they should remain around the current levels. I think it is difficult, to be honest, to guide more on timing, on how much time we will need to bring occupancy up. What I do know is that we have a target to get back up there at 95%. We have put in place the efforts which are required to intensify the letting activity. We have very good products.
Knowing also now that the Yara deal will mean that the building they were supposed to move into is going to be vacated from the first quarter 2026, our EPRA vacancy development is also going to be much dependent on how quick we are able to sign that volume. We are getting back up to 95%, but I do think that we will need to at least use this year and probably sometime next year before we can be there. I think it is worth commenting on also that the effects of all the terminations which we have reported these last three quarters are also represented in the rental income bridge.
The rental income bridge, while it has been a very clear forecast with maybe limited upside in the past, now also represents a picture of all known events and also represents more upside, as Ole also touched upon.
Thank you. This is a question regarding the Yara contract. Is the negative net letting of -NOK 25 million in the second quarter included in the rental income bridge?
Yes. The net letting effect is already included in the rental income bridge because the new lease contract with Yara was expected to start in 2027. It is beyond the period which we are forecasting.
Okay. What would be your latest funding conditions? And do you see banks more cautious in their approach?
In general, we do not see any changes from the banks. We just completed our bank refinancing in the very end of March.
Having said that, in the debt capital market, the spreads have come somewhat out from the issuance of the bonds issues we did in February at 125 basis points. After that, Moody's has affirmed our rating, and we are targeting to have a rating upgrade in the future. We will always work to reduce our funding costs. Right now, we do not see any changes in the behavior from the banks.
Thank you, Ole. Sonja, with that, we will conclude the Q&A session for today.
Thank you all for joining us today. Please feel free to get in touch if you should have any further questions. Thank you.