Welcome to the presentation of Public Property Invest Q3 report. My name is Ilija Batljan, and I'm currently the CEO of the company. Yesterday evening, we announced that André Gaden, who has been appointed new CEO of Public Property Invest, effective 1st of January, but let me start with the presentation. At this slide, you see the agenda. I will start with highlights, then we will go through operations. We'll also have a financial update, and then I will finish with summary and concluding remarks. The financial update will be presented by my colleagues, Ylva Göransson and Marianne Aalby, and after concluding remarks, we will have a Q&A. At this slide, you see highlights from our Q3 report that was a solid quarter, continuing to show a growth company with a very strong balance sheet.
We delivered a rental income of NOK 173 million, which is an increase of almost 19% in comparison to last year. Net operating income was NOK 157 million, a strong NOI margin of 91% in the third quarter. Net income from property management came at NOK 81 million, which is also strong given that interest rates are still high. We are delivering the first quarter with positive results for the last more than two years, a profit of NOK 30 million. Particularly, we think that the important message about our portfolio is that we are continuing to deliver positive net letting in this quarter, renewed leases with almost NOK 7 million in annual rent. On the financial side, we have had partial repayment of two bonds with NOK 664 million, and EPRA NRV increased to NOK 26.262 per share.
As I mentioned yesterday, it has been announced that André Gaden has been appointed as the new CEO, and I have been appointed as the new Chief Investment Officer. We have also, after the quarter, announced our first transaction after listing, buying a property in Sandnes with a yield of 7.2%. At this slide, you can see the presentation of our normalized annual run rate. We are expecting to deliver NOK 696 million in rental income on 12 months rolling, and after property expenses, that means net operating income of NOK 627 million. After deduction for administrative expenses, run rate EBITDA is expected to land at NOK 573 million. We are accounting to have financing costs with a current portfolio of NOK 270 million, so after financing costs, net income from property management should land at NOK 303 million. That means 1.45 NOK per share in net income from property management.
At the same time, continuing to have a very strong balance sheet with net debt to run rate EBITDA of 7.8 times. At the next slide, a few highlights from our portfolio. We have currently 368 sq m with a run rate rental income of NOK 696 million. We have a relatively low rent per sq m of NOK 1,913 per sq m. Our WAULT is currently 4.6 years. We have a relatively high net initial yield of 6.5%. At the same time, having a high occupancy of 97%. At the end of Q3, EPRA NRV was NOK 26.2. Next slide, we will go to operations. As I said in highlights, I'm really satisfied with how our property management is functioning. We are continuing to have a high occupancy of 97% and also continue to deliver positive net letting in this quarter.
We have renewed leases for NOK 6.9 million without termination. At the next slide, you can see just a flavor of our started transaction activities. We announced the first transaction acquisition of Jærveien 33 in Sandnes, which is part of Sandnes-Stavanger, the third largest region in Norway, in October this year. We are continuously working with transactions and have a very good pipeline with new transactions. At the next slide, you can see just a short market update. The first part of the slide is from one of the real estate advisors showing that we are probably at the bottom of the cycle. At the same time, you see the slide that we had in our IPO presentation showing how the Norwegian project syndicate market looks like. There are 426 projects with an approximate value of NOK 180 billion.
Many of those syndicates are economically struggling, and many of those are actually contacting us and trying to find a way so we can close transactions. So we do see that what we announced in connection to IPO, we will be able to deliver in the next few quarters. Next slide, just to give you some flavor about our strategic focus. We do have strong structural demand from the growing public sector that has been growing very strongly in the last years. We do see that we have potential for rent uplift from catching up with cost inflation and reinstatement values. Our long-term growth will also be supported from asset enhancement and development potential and selling building rights. We are, at the same time, continuing to focus on our role as a leading consolidator in the Norwegian syndicate market.
We do think that using shares as currency is supporting our offering, and we see that in connection to transactions that we are discussing, and that is, of course, giving an attractive entry point and liquidity for sellers, and at the same time, it is delivering value for our shareholders, so we are continuing to progress our significant pipeline of attractive transactions. At the same time, we do work with reducing our financing costs, having IG rating as top priority. We do see significant potential for reduced financing costs in the quarters to come, and we continue to have one of the strongest balance sheets in the market with 42.5% loan to value, 7.8 times net debt to EBITDA, and the most important thing, our cash flow is coming from AAA-rated Norwegian government.
At the next slide, we will give you some additional flavor related to positioning, relating to our exposure. As I mentioned before, we have been experiencing strong public sector employment growth. Our assets are specialized assets and are part of critical societal infrastructure. At the same time, we are able to combine our property management with a focus on ESG, that we are having an attractive proposition to our tenants that also are prioritizing ESG. And as you know, those assets are very sticky. Our tenants have been in our properties for 18 years, including options, actually 24 years. So our WAULT is effectively much longer than you can see from simple average. And that was a short update on operation. And now I will give the floor to my colleagues, Ylva Göransson, and after that, Marianne Aalby. Ylva, please.
Okay, thank you, Ilija. Let us start by looking at the financial development over the five last quarters, which shows strong growth the two last quarters due to acquisition of 13 properties in the end of April. Rental income was NOK 133 million in the third quarter compared to NOK 145 million in the same quarter last year. This is an increase of 19% and is mainly impacted by transactions and, of course, CPI adjustments. Rental income from the third quarter to the fourth quarter last year was down NOK 4 million, mainly due to an agreed rental discount to Oslo Met in Kunnskapsveien until the renegotiation of an extension was settled. As announced earlier, this contract has been extended with five years from the first of January next year. The acquired portfolio increased rental income with NOK 17 million in the second quarter and with NOK 25 million in the third quarter.
Net income from property management was NOK 81 million in the third quarter compared to NOK 56 million in the same period last year. The historical quarterly numbers are influenced by substantial costs associated with preparations of the IPO. EPRA NRV per share was NOK 26.2 at the end of September and is slightly up from last report due to a positive result in the period for the first time in a couple of quarters, and then we can go to the next slide. Net operating income amounted to NOK 157 million compared to NOK 129 million the same period last year. NOI margin was 91% in the quarter, and we can see positive effects from the structured changes we have made in the last quarters, taking more of the property management in-house. Administration expenses are slightly higher this quarter.
We have had some extra costs in connection with adapting the company to being a listed company, and we have chosen to employ more people to get core tasks in-house rather than buying these from external partners, and as Ilija mentioned earlier, we are preparing the organization for expansion. This will have a positive effect in the long run. We also have some additional income from management assignment for not-owned properties by the group, which you can see in reimbursement property management fee. Income from this assignment is 6 million NOK in the quarter, and year to date, this figure is 9 million NOK. In the annual run rate estimate, we only include income from agreed fixed fees. Net realized financials was 61 million NOK in the quarter, and transactions cost was 7 million NOK in the quarter and are relating to delayed invoicing from the second quarter.
The total transaction costs are NOK 99 million year to date, and these costs are due to the IPO process and are all non-recurring costs. Net value changes on both interest rates derivatives and investment properties had an impact on net profit of minus NOK 39 million in the quarter compared to minus NOK 354 million in the same quarter last year. Underlying, there were positive portfolio value changes of NOK 17 million in the quarter, offset by NOK 31 million in portfolio CapEx, which I will come back to on the next page. As a result, we had a positive net profit of NOK 17 million in the quarter. Then we can go to the next slide and have a short look at the balance sheet. Our property portfolio is valuated by external appraisers each quarter, and the value of our portfolio by the end of this quarter was NOK 9.9 billion.
As we have mentioned before, the valuation of our property portfolio has been written down by 22% since peak in 2022. In this quarter, the portfolio value was revised slightly up with NOK 17 million, which is the first quarter we can see that the downward trend of market values is reversed. The net yield of our portfolio was 6.5% by the end of September. Investments in our properties amounted to NOK 31 million in the quarter, and most of the investments are related to committed tenant alterations and ESG projects in Anton Jenssens gate in Tønsberg, where now Barne-, ungdoms- og familiedirektoratet has moved into new premises. In the end of September, we also partially repaid two bond loans by a total of NOK 664 million, which has reduced our interest-bearing debt from NOK 5.5 billion to NOK 4.9 billion.
I can just finish this up with saying that our balance sheet is very strong and we have strong key figures. Now I will let my colleague Marianne present our financial structure.
Thank you, Ylva, and good morning. As Ylva mentioned, PPI partially repaid two of the bonds in the quarter, and hence net nominal interest-bearing debt decreased by NOK 664 million to NOK 4.9 billion. The maturities of these two bonds were also extended from 2024 to 2027 and 2028. As a result, the weighted average maturity of the interest-bearing liabilities increased to 3.2 years. The group now has a very solid balance sheet with a loan-to-value ratio of 42.5%. PPI as a group only has NOK 211 million in debt maturing in the next 18 months. So to more than cover that, we have a credit facility of NOK 500 million and NOK 480 million in cash deposits, so a liquidity of NOK 980 million in total, which means a liquidity cover in excess of four times. The interest coverage ratio was 2.3 times at the end of the third quarter.
Credit margins on our debt have peaked. For each new financing we are obtaining, we get lower margin and lower all-in interest expenses. The leverage ratio of net debt to EBITDA was 7.8 times, which is among the lowest in the Nordic real estate market. In our financial policy, we are to have net debt to EBITDA lower than nine times. Obtaining an investment-grade rating is a top priority for us, and we believe the quality of our portfolio and our financial policy are in line with those of our investment-grade rated peers. Going forward, we will work diligently to reduce financing costs, obtaining a more attractive financing mix, and extending the maturity profile on our debt portfolio. Back to you, Ilija, for closing remarks. Thank you.
Thanks, Marianne and Ylva. I will now go to concluding remarks. As you can see, we have solid operations. We are delivering results in line with run rate guiding. Our cash flow is sticky, with 29% coming from government tenants, Norwegian government, which is AAA-rated credit. We are also delivering a strong occupancy rate of 96.7%. If you look at how we have been developing the company, we are also continuing to build the organization with a lean and proactive management team. The board appointed André Gaden as new permanent CEO. André has been chosen among well-qualified internal and external candidates. André has a long track record within the real estate sector. At the same time, I'm continuing to work with the company as Chief Investment Officer. We will continue our focus on growth by pursuing value-accretive transactions.
We announced the first transaction already in October this year, and we have a large and diversified pipeline that we will continuously deliver to market with new transactions in the next quarter. We do see that many syndicates are struggling and that our shares are an attractive currency in the current market. At the same time, as Ylva and Marianne pointed out, we will continue to chase the potential for reduced financing costs and also, at the same time, delivering a more attractive financing mix. Market rates are at the bottom or at the top, given that the cycle is at the bottom or close to the bottom, and we will see falling markets, interest rates, and also tighter credit margins.
We have obtaining IG rating as top priority, and our portfolio quality and our strong financial policy that we also emphasize with having as a target to have net debt to EBITDA below nine times throughout the cycle are in line or better than IG-rated peers. So we look forward to continuing to build on PPI, and I will stay there and ask my colleagues to join so we can have a Q&A session. Marianne and Ylva, please. Now, please start with questions.
Thank you, Ilija. So firstly, can you comment on your letting processes and upcoming expires?
Q3 is normally not the most active quarter as it contains two summer vacation months. But after the quarter, we have seen quite high activity on the letting side and have several relatively large and positive processes ongoing that we hope to close during Q4. We do not have any large lease expires in the coming 12-18 months, and we are not worrying for that. We had announced before that we have Oterveien at Kongsberg and Farmannsveien in Tønsberg, where we are having ongoing development projects.
Ylva, administration costs is up NOK 6 million quarter on quarter in your normalized run rate model. What is the reason for this?
Yes. As I mentioned in our presentation, we have chosen to employ a few more people in order to get core tasks in-house rather than buying these from external partners, and we are now building an organization that will be scalable for further growth, and I think this will have a positive effect in the long run.
To follow up, the normalized net financials were up only NOK 5 million despite reported interest costs up by 1% from Q2. Can you comment?
Yes. Late in September, we made a repayment of two of our bond loans by NOK 664 million. So that's the main reason for that. We have reduced our interest-bearing debt down to NOK 4.9 billion.
One property was put on the development sites in the east region in Q2. Which property is this? And are there any construction ongoing? And if so, when will it be finalized?
This is Anton Jenssons gate 11 in Tønsberg. This is part of our cluster in Statens Park in Tønsberg. We are currently initiating a zoning process for the entire Statens Park, where this property is intended to have a different purpose and is planned for residential development, and as I said before, we see this development of building rights as additional value creation for our business, and we will sell the building rights when the zoning is done.
As you report, a quite high property value per square meter is of NOK 42,000 for the development sites versus NOK 26,600 for the management portfolio. Can you explain?
We have made a change in how we show our property value in this quarter. We have now chosen to show the value of our management portfolio and the value for our development sites. And the value for development sites also includes zoned land on existing properties, except for this Anton Jenssons gate. It also includes zoned land in Jonas Lies gate in Lillestrøm and other parts in Farmansveien in Statens Park, and also a value for Wilbergjordet in Fredrikstad.
When will you communicate anything on dividends?
As I pointed out in the CEO letter, PPI is a dividend company, and the board will present the dividend in connection to the presentation of our year-end report.
Your average interest rate is relatively high. What can you say about the future development?
Well, as we mentioned earlier, our margin has peaked. The margin on the last financing we obtained was lower than we have on the rest of our debt portfolio. So it will certainly go down. We're confident in that.
Can you comment on your experience on acquiring syndicates and how much growth you expect in the portfolio as a consequence of this?
We are being very clear in our messaging that we are taking a role as a leading consolidator in the Norwegian syndicate market. We have an amount of ongoing deals where we are working with our friends at syndicates to find the best deal both for our shareholders but also for those struggling in syndicates. Because, as I mentioned earlier in the presentation, many syndicates are having tough financial challenges, and many of those are also waiting for the last moment to solve the problems in order to safeguard as much as possible their values. But we feel that we have a very good dialogue, and we should be able to announce a few more deals already during Q4.
Can you give some more details on the process of becoming an investment-grade company?
Yes, this is important to us in order to reach our long-term goals. We believe the quality of our portfolio and our financial policy are in line or even better than our investment-grade rated peers. This is something we're working on.
You said positive net letting. Can you comment a bit on that?
As I said, I mean, we have had strongly positive net letting for the first nine months of this year. However, in Q3, we only had prolonging, and this is basically, as I mentioned before, because Q3 is normally not the most active quarter for lettings.
The reported occupancy seems impacted by the development property reclassification, as you commented. But how is the EPRA vacancy rate impacted by the reclassification?
I mean, the main change here is that we are adjusting to EPRA, basically, and reporting economic occupancy. Before, we have been reporting area occupancy, and that is, of course, not the right way to do it. So we do a lot to be in compliance with EPRA and to check all of our reporting to have a higher standard.
Can you say something about the development plans of Statens Park in Tønsberg, both time horizon and visions?
We have a very strong position in Tønsberg with Statens Park. I mean, we signed new leases with NAV, which is a Norwegian, how to say, social security agency, new lease with Helfo, new lease with Bufdir, so we have very good progress on the letting side, and at the same time, as I mentioned earlier, we are starting the development process, so we like Tønsberg, and we will continue to develop Statens Park.
Thank you. I think that concludes the Q&A.
Thank you all. Thank you for listening.
Thank you.