Outlook Norway 2020 Pangea Research - "Continued surge for investing in real estate" - Mynewsdesk

Page created by Bryan Cannon
 
CONTINUE READING
Outlook Norway 2020 Pangea Research - "Continued surge for investing in real estate" - Mynewsdesk
“Continued surge for
investing in real estate”

               Pangea Research
Outlook Norway 2020
                            FEBRUARY 2020
Outlook Norway 2020 Pangea Research - "Continued surge for investing in real estate" - Mynewsdesk
Highlights –Norway 2020
                                                                                              TA B L E OF CON TEN T

    Weakened economic growth due to reduced investments in the oil & gas
    sector, but still a strong investment climate going forward
                                                                                                   – Summary 3

    Key policy rate expected to remain steady at 1.50 % for the foreseeable future
    after three rate hikes in 2019                                                         – Macroeconomic Overview 9

    2019 represented a third straight year of increasing transaction volumes,
    reaching NOK ~97bn, which is the second highest volume ever                           – Real Estate Debt Financing       16

    Oslo office market remains robust with an active transaction market and record
                                                                                         – Norwegian Transaction Market 18
    rent levels expected to increase further in 2020 and 2021

    Oslo office prime yield at ~3.75 %, and the spread to regional markets                    – Property Segments 22
    continues to narrow with prime yield in Bergen reaching a record low ~4.0 %

    Favorable outlooks for office and logistics, while retail is experiencing sluggish        – Property Investors     30
    performance and increasing yields

                                                                                             – Nordic Listed Sector 36
    Expensive hedging cost and strong local demand has curbed international
    investors’ interest in Norwegian real estate, especially core assets

                                                                                            - Pangea Property Partners 41
    New capital requirements by the end of 2020 is not expected to raise
    borrowing cost due to competition among banks

    Consolidation trends in the Nordic listed sector, and well-established market
    players growing larger through acquisitions

2
                                                                                                Pangea Outlook Norway 2020        Pangea Property Partners
Outlook Norway 2020 Pangea Research - "Continued surge for investing in real estate" - Mynewsdesk
Summary

3
              Pangea Outlook Norway 2020   Pangea Property Partners
Outlook Norway 2020 Pangea Research - "Continued surge for investing in real estate" - Mynewsdesk
HOT

Norwegian temperature watch                                   Strong fundamentals supporting market growth in 2020                                                            COLD

                   OVERALL                                          MACRO                                    BUY-SIDE                                        SELL-SIDE

                                                                                                                                                  COMPLETED
      TRANSACTION              MACRO                                        EMPLOYMENT                                                          DEVELOPMENT              PROFIT TAKING
           MARKET                                    GDP GROWTH                                   SYNDICATES            PROPERTY FUNDS
                               RENTAL MARKET           INFLATION                                                        LISTED SECTOR
                                                                                                 INSTITUTIONS                                 STRATEGIC EXITS            PORTFOLIO
    PROPERTY YIELDS            FINANCING           INTEREST RATES           POP. GROWTH                                                                                  SHARPENING
                                                                                            PRIVATE COMPANIES
                                                                                                INTERNATIONAL

          Active transaction market                        Strong labour market                 Syndicates/funds are heavy net buyers               Developers continuous sellers

                                                              FINANCING                                 RENTAL MARKET                                       YIELD LEVELS
    Stable macro outlook, with moderate
    GDP-growth and inflation, and low
    unemployment

    High demand; financial buyers are still
    the most active investor group

    Several projects to be completed in                                                           OSLO OFFICE
    2020 are expected to trigger sales              BOND MARKET             BANK LOANS              LOGISTICS           REGIONAL OFFICE
                                                                                                  RESIDENTIAL           REGIONAL HOTEL                 HOTELS             LOGISTICS
                                                      BORROWING                                                                                    RESIDENTIAL            REGIONAL AND
    Still favorable outlook for office and                                  INSTITUTIONAL                               OSLO HOTEL                                        OSLO OFFICE
                                                        MARGINS
    logistics, and increasing interest for hotel                            CREDIT

    Generally flat yield development, and                                                               RETAIL                                          RETAIL
    increasing rents across most segments

    Marginal effect of recent interest rate
    increase; consensus is no rate hikes in
    2020
                                                   Bonds important part of financing mix          Still decent growth in office rents             Retail facing further yield increase

4
                                                                                                                               Pangea Outlook Norway 2020        Pangea Property Partners
Outlook Norway 2020 Pangea Research - "Continued surge for investing in real estate" - Mynewsdesk
Norwegian macroeconomic outlook                      Implications for the real estate market

       Parameter      2019F      5Y forecast 1)   Comments                                                           Impact on real estate                                                            Outlook

                                                    Moderate outlook for the Norwegian economy which is                     Historically, property returns exhibits high correlation
                                                    expected to grow alongside the inflation rate                           with GDP growth
    Economic growth
                       1.1 %         2.1 %
         (GDP)
                                                    Positive impact of large petroleum investments is                       Vacancy rates and rent levels are slow to reflect
                                                    expected to decrease in upcoming years                                  economic expansion

                                                    Population growth around the Nordic average but far                     Population growth positively impacts real estate prices
                                                    above the European average                                              long-term, notably in the residential segment
     Demographics
                       0.7 %         0.7 %
      (Population)
                                                    Population growth is driven by immigration, as the                      Urbanization trend drives demand for real estate in
                                                    Norwegian fertility rate and birth surplus is decreasing                larger cities and is expanding the city centers

                                                                                                                            High employment rates often translates to healthy
                                                    From the peak in 2016 of ~4.7 %, unemployment has
                                                                                                                            demand for real estate and low vacancy risk
                                                    continuously fallen to 3.7 % in mid 2019
     Labour market
                       3.7 %         3.7 %
    (Unemployment)                                                                                                          With employment rates far below Nordic and Eurozone
                                                    Going forward, the unemployment rates are expected
                                                                                                                            averages, the Norwegian market implies lower risk for
                                                    to remain steady at current levels
                                                                                                                            investors

                                                    Moderate inflation in 2019 of 1.4 %, slightly below                     Affects real estate directly through rental income as
                                                    target                                                                  lease contracts usually include annual CPI indexation
        Inflation
                      1.4 %2)        2.0 %
          (CPI)
                                                    Only minor deviations are expected from Norges                          Expectations of moderate inflation eases pressure of
                                                    Banks’ target of 2.0 % in coming years                                  further hikes in the key policy rate

                                                                                                                            No further interest hikes are expected, and despite
                                                    An unchanged key policy rate is expected for upcoming
                                                                                                                            increased capital requirements for banks by the end of
                                 Aug-19: 1.44 %     years
                                                                                                                            2020, it is also expected that margins will remain flat
      Interest rate
                      1.893) %   Jan-20: 1.89 %                                                                             due to fierce competition
        (5Y swap)                                   However, as global tensions rise and dark clouds arise
                                   ∆: +45bps        on the world economy, Norges Bank might be forced to
                                                                                                                            Therefore, financing cost and investors cost of capital is
                                                    conduct rate cuts
                                                                                                                            likely to remain stable in 2020

                                                                                                          1) Projections   from SSB, IMF, Norges Bank,   2)   Actual inflation for 2019,   3) As   of January 9th 2020

5
                                                                                                                                    Pangea Outlook Norway 2020                  Pangea Property Partners
Outlook Norway 2020 Pangea Research - "Continued surge for investing in real estate" - Mynewsdesk
Category                                      Comments                                                                 Outlook

                  •   Historically low prime yield, and all time high office rents with     •   Vacancy bottoming out in 2020, expected to slightly
                      expected growth in 2020                                                   increase due to more supply
                  •   Sellers market with few prime assets driving investors to
 Oslo Office
                      regional office markets or portfolio acquisitions
                                                                                            •   Stable yield, rental growth and high demand

                  •   Strong rental market overall and more tenants seeking modern          •   Lower rental increase in 2020 than in previous years, but
                      premises in up and coming office clusters                                 still exceeding inflation

                  •   Transaction volumes and liquidity in Bergen, Trondheim and            •   Bergen: Increasing rents (especially in the city center), and
                      Stavanger indicate healthy and attractive markets                         strong investor appetite

                  •   Very low yield-spread incentivizing investors to look at              •   Trondheim: Expected rental growth due to low vacancy and
Regional Office
                      secondary markets for better returns                                      less supply in 2020, compared to previous years

                  •   Decreased unemployment rates and vacancy levels in                    •   Stavanger: Declining vacancy due to employment growth
                      Stavanger                                                                 and moderate supply. High investor interest going forward

                  •   Shopping centers face challenges of declining turnover and
                                                                                            •   Increasing CAPEX to create full-service destinations and
                      rising occupancy cost-ratios
                                                                                                improved customer experience in order to compete with e-
                  •   Traditional retail is still by far the largest shopping channel for       commerce
                      Norwegian consumers, with shopping centers accounting for
    Retail                                                                                  •   Stronger integration between traditional stores and e-
                      19 % of retail volume in 2019
                                                                                                commerce and vice versa
                  •   The negative trend in retail is exposing secondary assets,
                                                                                            •   Continued repricing of the sector – lower values per square
                      especially within the shopping center segment where
                                                                                                meter due to unsustainable occupancy cost ratio levels
                      operational performance is strongly deviating

                  •   Benefit from strong underlying macro indicators in Norway             •   Growth in foreign demand is expected to continue across
                      and key feeder markets as well as the weak currency                       Norway

                  •   Demand growth in the last years underlines the attraction of          •   Oslo market is expected to further absorb its recent new
    Hotel
                      Norway as a destination                                                   supply

                  •   Institutional investors show increasing interest for hotels as a      •   2020 is projected to record a higher transaction volume
                      diversifying property segment                                             than 2019

                  •   Logistics segment has been affected by considerable yield
                                                                                            •   E-commerce is still expected to grow substantially, but with
                      compression in recent years
                                                                                                the need for closer integration with traditional stores
                  •   Decrease in volume and number of deals in 2019 can be
   Logistics                                                                                •   Still an underdeveloped segment with potential – increased
                      explained by only a small number of assets in play
                                                                                                construction and investment activity is expected
                  •   A demand which greatly exceeds supply has caused a surge in
                                                                                            •   Expectations of rental price growth in the best locations
                      land prices in the greater Oslo area
                                                                                                                             Pangea Outlook Norway 2020         Pangea Property Partners
Outlook Norway 2020 Pangea Research - "Continued surge for investing in real estate" - Mynewsdesk
Segments outlook                          Overall outlook arguing a strong real estate market in 2020

         Key drivers                 Office            Logistics             Hotel               Retail                Residential                     Comments

                                                                                                                                             High demand for office in both
                                                                                                                                             transaction and rental markets
        Rental market               Positive        Slightly positive   Slightly positive      Negative                  Neutral             Lagging turnover growth in retail
                                                                                                                                             has put pressure on occupancy cost
                                                                                                                                             ratios

                                                                                                                                             Risk of higher interest rates affects
                                                                                                                                             the entire market, regardless of
    Interest rate sensitivity   Slightly negative   Slightly negative   Slightly negative   Slightly negative       Slightly negative        segment
                                                                                                                                             Low yielding properties and highly
                                                                                                                                             leveraged segments are sensitive

                                                                                                                                             Continued high competition among
                                                                                                                                             banks and strong bond market
       Debt availability        Slightly positive   Slightly positive   Slightly positive      Negative              Slightly positive       Increased focus on green financing
                                                                                                                                             New capital requirements by the
                                                                                                                                             end of 2020

                                                                                                                                             High appetite for real estate –
                                                                                                                                             office, development and logistics
                                                                                                                                             considered particularly attractive
     Investor preference            Positive            Positive            Positive        Slightly negative        Slightly positive
                                                                                                                                             Some reluctance towards retail –
                                                                                                                                             mismatch in valuations between
                                                                                                                                             buyers and sellers

                                                                                                                                             Large supply of new offices in Oslo
                                                                                                                                             in 2020/2021

     New supply balance             Neutral         Slightly positive   Slightly negative   Slightly positive            Neutral             Little conversion due to office being
                                                                                                                                             the preferred segment
                                                                                                                                             Hotel absorption period

                                                                                                                                             High demand for office and logistics
                                                                                                                                             but few good objects
            Overall                 Positive            Positive        Slightly positive   Slightly negative            Neutral
                                                                                                                                             Increasing interest in hotels among
                                                                                                                                             many investors

7
                                                                                                                Pangea Outlook Norway 2020        Pangea Property Partners
Outlook Norway 2020 Pangea Research - "Continued surge for investing in real estate" - Mynewsdesk
Investor outlook                               Active financial investors with funds/syndicates as the largest net buyers

                                                                                       Activity 2019    Outlook 2020
               Category                     Estimated holdings 1)                                                            Comments
                                                                                       (Net buy/sell)   (Net buy/sell)

                                                                                                                                 Outlook: Neutral to net buyers
                                                                                   Gross: NOK 7.9bn
                                                                                   Buy: NOK +6.1bn                               Generally high interest but lower than in 2019
        Institutional investors                  NOK ~170bn
                                                                                   Sell: NOK -1.8bn
                                                                                                                                 Increased focus on sustainable investments and
                                                                                   Net: NOK +4.3bn
                                                                                                                                 replacing secondary assets

                                                                                                                                 Outlook: Net buyers
                                                                                   Gross: NOK 15.4bn
           Listed property                                                         Buy: NOK +5.2bn                               Moderate leverage with capacity to invest
             companies2)                         NOK ~118bn
                                                                                   Sell: NOK -10.2bn
                                                                                                                                 Low liquidity and aggressive book values according
                                                                                   Net: NOK -5.0bn
                                                                                                                                 to stock market

                                                                                                                                 Outlook: Net buyers
                                                                                   Gross: NOK 38.6bn
              Property                                                             Buy: NOK +28.1bn                              Largest net buyers for the third consecutive year
          funds/syndicates                       NOK ~155bn
                                                                                   Sell: NOK -10.6bn
                                                                                                                                 Industrial and office properties have provided the
                                                                                   Net: NOK +17.5bn
                                                                                                                                 highest syndicate returns in recent years

                                                                                   Gross: NOK 76.0bn                             Outlook: Net sellers
           Private property                                                        Buy: NOK +31.9bn
                                                NOK ~1,335bn                                                                     Highly diverse group of investors
              companies                                                            Sell: NOK -44.1bn
                                                                                   Net: NOK -12.3bn                              Continue to be affected by consolidation

                                                                                   Gross: NOK 45.4bn                             Outlook: Net sellers
                                                                                   Buy: NOK +21.5bn                              Lower yield spread than Nordic peers could drive
       International investors                   NOK ~95bn
                                                                                   Sell: NOK -23.9bn                             some international investors out
                                                                                   Net: NOK -2.4bn                               Norway is still considered robust and low risk

                                                                                                                                 Outlook: Net sellers
                                                                                   Gross: NOK 9.6bn
                                                                                   Buy: NOK +3.7bn                               This group typically does not have real estate as
                 Other                                n.a.
                                                                                   Sell: NOK -5.9bn                              main asset class
                                                                                   Net: NOK -2.2bn
                                                                                                                                 Sales likely triggered by buy-side initiatives

1) Estimated   holdings as of Jan-20 based on company reporting and net transactions                                                                         Read more page 30-35
2)   Transaction volumes include construction companies
                                                                                                                                                                  Source: Pangea Research
8
                                                                                                                         Pangea Outlook Norway 2020         Pangea Property Partners
Outlook Norway 2020 Pangea Research - "Continued surge for investing in real estate" - Mynewsdesk
Macroeconomic Overview

9
                      Pangea Outlook Norway 2020   Pangea Property Partners
Outlook Norway 2020 Pangea Research - "Continued surge for investing in real estate" - Mynewsdesk
Market size                         The Nordics – Increasingly larger share of European listed real estate sector

 POPULATION                                        EU      Nordics   % of EU
                                                                                Nordics
                                                                                EU
 Total 2019 (million)                             511        27       ~5%
                                                                                Other

 5Y forecast (% p.a.)                            +0.1%     +0.6%        -

 ECONOMY

 GDP 2019 (EURbn)                                16,477     1,408     ~9%

 5Y forecast (% p.a.)                            +1.6%     +1.7%        -

 PROPERTY MARKET

 Trans. volume 2019 (EURbn)                       290        46       ~16%

 Annual turnover (10Y)                            2.5%      4.7%        -

 STOCK MARKET1)

 Total market cap (EURbn)                        ~12,370    1,540     ~12%

 CRE market cap (EURbn)                           ~444      ~73       ~17%

 1)   All developed markets in Europe (Sep-19)

                                                                                                                              Source: IMF, EPRA, Pangea Research
10
                                                                                                 Pangea Outlook Norway 2020        Pangea Property Partners
Economic growth                           Stable economic growth in Norway despite unstable international outlook

     Mainland GDP growth expected at 2.5 % in 2019, exceeding SSB trend growth by 50 bps
                                                                                                                       GDP GROWTH FORECAST (NEX T 5Y)
     Expected GDP growth for 2019 is currently 1.1 %

     – The growth has mainly been driven by increased petroleum and industrial
                                                                                                  2.5 %
       investments, but also a weak currency and a low interest rate
     – The positive impulse from the petroleum investments is expected to decrease as of
                                                                                                  2.0 %
       2021 as large projects are completed such as the Johan Sverdrup oil field

     Despite a global trade war and an unstable international economy, the Norwegian              1.5 %

     economy is expected to grow by 3.5 % in 2020
                                                                                                  1.0 %
     – Average expected GDP growth from 2020 to 2024 is 2.1 % due to reduced petroleum
       investments                                                                                0.5 %
     – The economic activity is expected to be somewhat lower in years following 2020 with
       the main GDP drivers believed to originate from consumption, exports and real estate       0.0 %
                                                                                                           Norway            Sweden         Finland         Denmark            Nordics          Eurozone
     The Eurozone is still characterized by an uncertain Brexit and global trade tensions which
                                                                                                                                          2019F     2020F-2024F
     slows down the growth of export-oriented European economies, reflected in their
     modest expected joint growth of 1.4 % in 2020

                                  REAL GDP PER CAPITA                                                                   GROWTH IN REAL GDP PER CAPITA

           800,000                                                                                3.0 %
                                                                                                                                                           2.4 %
                                                                                                  2.5 %
           600,000                                                                                                                1.9 %
                                                                                                  2.0 %   1.7 %                                                                      1.6 %
     NOK

           400,000                                                                                1.5 %

                                                                                                  1.0 %
           200,000
                                                                                                  0.5 %

                0                                                                                 0.0 %
                     Norway    Sweden           Finland       Denmark   Nordics   Eurozone                  Avg. 2014-2018                2019F                     2020F                Avg. 2021F-2024F

                                        2019F      2014-2018 avg.                                                              Norway      Sweden     Finland      Denmark

                                                                                                                                                            Source: Pangea Research, SSB, IMF, Eurostat
11
                                                                                                                               Pangea Outlook Norway 2020                    Pangea Property Partners
Demographics                          Continued urbanization trend and an aging population

     The Norwegian population is expected to grow by ~0.7 % annually from 2020 to 2024
                                                                                                                                          POPULATION FORECAST (NEX T 5Y)
     – Total growth of 7.6 % by 2030

     Even though a decline in net immigration and birth surplus has caused a weakening
     population growth rate, Norway’s population is expected to grow at a faster rate than        1.0 %
     the Nordic and Eurozone average for the next five years
                                                                                                  0.8 %

     Urbanization is still a prominent trend and the population growth is expected to continue
                                                                                                  0.6 %
     to thrive in Norway’s largest cities (Oslo, Bergen etc.)
     – Oslo has been one of Europe’s fastest growing cities the past five years and is            0.4 %
       expected to grow by 1 % annually the next five years
                                                                                                  0.2 %
     By 2040, people over 65 years will constitute approximately 24 % of the population
     corresponding to an increase of 56 % from 2019                                               0.0 %
                                                                                                                      Norway             Sweden          Finland           Denmark    Nordics           Eurozone
     Birth surplus is expected to continue its trend of a slight negative growth, meaning
     population growth will be driven by immigration                                                                                                     2019F       2020F-2024F

                  BIRTH SURPLUS AND NET IMMIGRATION - NORWAY                                                                   DEMOGRAPHIC AGE DEV ELOPMENT - NORWAY

       70,000                                                                                                 3,500
                                                                                                                                         17 % (~0.90m)
       60,000                                                                                                 3,000                                                                   26 % (~1.72m)

       50,000                                                                                                 2,500
                                                                                                                                 CAGR:                               CAGR:                       CAGR:

                                                                                                   Millions
       40,000                                                                                                 2,000              +0.2 %59 % (~3.14m)                 +0.2 %                     +2.2 %
                                                                                                                                                                                      53 % (~3.45m)
       30,000                                                                                                 1,500

       20,000                                                                                                 1,000

       10,000                                                                                                  500
                                                                                                                               1,258          1,305                3,155      3,315             919         1,437
           0                                                                                                     0
                '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19                                        0-19                            20-64                          65+

                                      Birth surplus   Net immigration                                                                                        2019F     2040F

                                                                                                                                                                                                       Sources: SSB, IMF
12
                                                                                                                                                  Pangea Outlook Norway 2020           Pangea Property Partners
Labour market                           Steady labor market expectations going into 2020

     The Norwegian unemployment rate has declined continuously from ~4.7 % in 2016 to
                                                                                                                  UNEMPLOYMENT FORECAST (NEX T 5Y)
     3.5 % in mid 2019

     The unemployment rate is expected to be stable at 3.7 % towards 2024 due to low levels
     of immigration and population growth                                                       8.0 %

     − From a historical perspective, this is regarded as normal capacity utilization
                                                                                                6.0 %
     Nominal salary growth is expected to reach ~3.5 % in 2019, and stabilize in conjunction
     with unemployment
                                                                                                4.0 %
     – Salary growth is likely to benefit low-wage earners the most as their relative
       bargaining power increases
                                                                                                2.0 %
     European unemployment rates has steadily come down since the financial crisis, but the
     outlook is uncertain as growth is cooling in the face of trade war and Brexit              0.0 %
                                                                                                         Norway       Sweden              Finland          Denmark            Nordics      Eurozone
     – The fall in unemployment has not bolstered wages and lifted inflation as policymakers
       would have hoped, and additional monetary stimulus is now being lined up
                                                                                                                                       2019      2020F-2024F

                                                                                                                                                                       1)
                               SALARY GROWTH - NORWAY                                                                  (UN)EMPLOYMENT - NORWAY

       4.0 %                                                                                    5.0 %

       3.5 %
                                                                                                4.0 %
       3.0 %

       2.5 %                                                                                    3.0 %
       2.0 %

       1.5 %                                                                                    2.0 %

       1.0 %
                                                                                                1.0 %
       0.5 %

       0.0 %                                                                                    0.0 %
                2016        2017         2018       2019F        2020F   2021F          2022F           2012   2013   2014      2015      2016      2017       2018   2019F     2020F   2021F   2022F

                                   CPI          Nominal salary Growth                                                        Employment growth         Unemployment

                                                                                                                                       1) (Un)employment    based on AKU (Arbeidskraftsundersøkelsen)
                                                                                                                                                                                     Source: SSB, IMF
13
                                                                                                                         Pangea Outlook Norway 2020                         Pangea Property Partners
Inflation                       Expected five year inflation in line with Norges Banks’ target of 2.0 %

     Norwegian inflation in 2019 reached 1.4 %, down from 2.7 % in 2018
                                                                                                                                                     INFLATION FORECAST (NEX T 5Y)
     – Inflation affected by multiple hikes in the key policy rate and periods of large volatility
       in oil prices
     – Simultaneously, the effect of a weakening NOK in Norway’s heavy export driven
       economy can help explain the higher inflation rate in Norway versus the Eurozone                            2.5 %

     Norwegian inflation is expected to stabilize around the central bank’s long term target of
                                                                                                                   2.0 %
     2.0 %, a slightly higher level compared to the Eurozone
                                                                                                                   1.5 %
     As central banks all around the world cut interest rates last year, Norges Bank forged its
     own path and increased its key policy rate three times in 2019
                                                                                                                   1.0 %
     – Norges Bank is expected to hold the policy rate steady for the next few years,
       although this could change depending on the political state, trade between the                              0.5 %
       largest economies and other countries policy rates
                                                                                                                   0.0 %
     International oil reserves are expected to expand in coming years due to current
                                                                                                                                Norway            Sweden            Finland          Denmark        Nordics             Eurozone
     production rates and uncertainty surrounding the trade war, adding downwards pressure
     on oil prices with the possibility of hampering Norwegian growth and inflation                                                                                  2019     2020F-2024F

                          INFLATION V S EX CHANGE RATE - NORWAY                                                                             K EY POLICY RATE V S INFLATION - NORWAY

       4.0 %                                                                                                 120       5.0 %

       3.5 %                                                                                                 115
                                                                                                                       4.0 %
       3.0 %                                                                                                 110

       2.5 %                                                                                                 105       3.0 %
       2.0 %                                                                                                 100

       1.5 %                                                                                                 95        2.0 %

       1.0 %                                                                                                 90
                                                                                                                       1.0 %
       0.5 %                                                                                                 85

       0.0 %                                                                                                 80        0.0 %
               2010       2011      2012      2013      2014   2015    2016     2017      2018     2019                        2010      2011      2012     2013      2014      2015       2016   2017     2018         2019

                      Norwegian inflation (left axis)           Import-weighted exchange rate (right axis)                                      Monthly CPI (YOY)             Key policy rate        Inflation target

                                                                                                                                                                                                   Sources: Norges Bank, SSB, IMF
14
                                                                                                                                                          Pangea Outlook Norway 2020                Pangea Property Partners
Interest rates                  Unchanged key policy rate expected in the next two years

     Flattening of the Norwegian yield curve and lower spread between bonds of different                                                                                         1)
     maturities indicates uncertainty about the economic outlook                                                                        NORDIC K EY POLICY RATES

     – Despite the yield convergence, Norway still enjoys a large spread towards the other
       Nordic countries
                                                                                                             2.00%                                                                                Q1-Q3
     Recent interest hikes in conjunction with “Boliglånsforskriften” launched in 2017 has                                                                                                        +75bps
     slowed growth in housing prices as intended, according to Norges Bank                                   1.50%

     – However, the interest hikes are suspected to only have affected the commercial real                   1.00%
       estate market marginally due to high investor appetite and strong underlying
       fundamentals                                                                                          0.50%

     The Norwegian interest rate environment indicates a healthy economy                                     0.00%

     – Recent key policy rate hikes have provided Norges Bank some room to maneuver in
                                                                                                             -0.50%
       case of a financial downturn, whereas large parts of the world’s central banks have
       limited tools available                                                                               -1.00%
     – No further key policy rate hikes are expected in the upcoming years                                        Jan-15          Jan-16             Jan-17             Jan-18                Jan-19             Jan-20

     Prospects for the world economy in 2020 are expected to remain rather sluggish,
                                                                                                                               Norway            Sweden            Denmark             Finland (Euro)
     amongst other due to trade tensions and risk of downturns in major economies, which
     might affect interest rate policy

                                                                                   1)                                                                                                    1)
                     NORDIC INTEREST RATE TERM STRUCTURES                                                                       NORWEGIAN SWAP RATES (LAST 12M)

                                                                                                                                                                                       Aug-19 to Jan-20
       2.5 %                                                                                                 2.25%

       2.0 %
                                                                                                             2.00%
       1.5 %

       1.0 %
                                                                                                             1.75%
       0.5 %

       0.0 %
                                                                                                             1.50%
                                                                                                                                                                                                        Δbps: 37-53
       -0.5 %

       -1.0 %                                                                                                1.25%
                3m      6m     1Y swap     2Y swap   3Y swap   4Y swap   5Y swap        7Y swap   10Y swap       Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20

                      Norway             Sweden          Denmark           Finland (Euro)                                                  3Y Swap            5Y Swap          10Y Swap

                                                                                                                                                                                           1) As of January 15h 2020

                                                                                                                                                                             Source: Norges Bank, Thomson Reuters
15
                                                                                                                                        Pangea Outlook Norway 2020                    Pangea Property Partners
Real Estate Debt Financing

16
                          Pangea Outlook Norway 2020   Pangea Property Partners
Debt financing                          Bonds stabilizing as a significant part of real estate financing mix

     The Norwegian Central Bank reported a total debt volume of NOK ~1,430bn in 2018,                                                                                                        1)
                                                                                                                                               BORROWING COST (LAST 10Y)
     whereas commercial real estate accounted for ~45 %, i.e. NOK ~640bn
     – Banks accounted for ~85 % and bonds ~15 % of the NOK 640bn

     Total outstanding real estate bond debt has increased by ~500 % from NOK ~20bn in                         7%
     2013 to NOK ~120bn in 2019                                                                                6%
                                                                                                                                                                          New capital
                                                                                                                                                                         requirements
                                                                                                               5%
     While the bond market in general experienced a setback after the oil crisis in 2014, real
     estate bond issues have generally played a greater part of real estate companies ’                        4%

     financing mix, and constitute close to 30 % of the bond market in 2019                                    3%                                                                                                                       204bps
                                                                                                                                                                                                          245bps
                                                                                                                                                                                 165bps
                                                                                                               2%
     While the 5Y SWAP has increased since the beginning of 2018, total borrowing cost is
     close to the same at ~4 % according to UNIONs quarterly bank survey                                       1%

     – This is mainly due to competition among banks, which is also likely to restrain a raise                 0%
                                                                                                                Jan-10       Jan-11   Jan-12     Jan-13    Jan-14       Jan-15   Jan-16      Jan-17    Jan-18      Jan-19        Jan-20
       in margins despite new capital requirements for banks by the end of 2020
                                                                                                                                                     5Y SWAP               Total borrowing cost

                               NORWEGIAN BOND ISSUES (LAST 10Y)                                                          FIV E LARGEST BOND ISSUERS AND 5Y SWAP SPREADS

             140                                                                                       12                                                                                                                   120
                                                                              119
             120                                                                                       10                                                                                                                   100
                                         100           99                            101
             100                  85                                          35
                                         14            10                                                  8                                                                                                                80
                                                                                     28
     NOKbn

                                                                                                   NOKbn
             80                   13                                                        64
                                                                       60

                                                                                                                                                                                                                                  bps
                                                                 58                                        6                                                                                                                60
             60           43
                   38                                                                       18
                           1                                     18    23                                  4                                                                                                                40
             40                          86            89                     84
                    4             72                                                 73
             20           42                                     40                         46             2                                                                                                                20
                   34                                                  37
                                                                                                                      ~11                  ~10                    ~9                    ~6                 ~5
              0                                                                                            0                                                                                                                0
                   2010   2011    2012   2013          2014     2015   2016   2017   2018   2019                     Entra              Vasakronan                OLT               NPRO                Riksheim

                                               Other     Real Estate                                                             Outstanding bond volume (l.a.)         5Y SWAP spread over 3M NIBOR (r.a.)

                                                                                                                                                                             1) Figures as of January 15th 2020

                                                                                                                    Sources: Pangea Research, Nordea Markets, DNB Markets, UNION Bankundersøkelse Q4 2019
17
                                                                                                                                                 Pangea Outlook Norway 2020                       Pangea Property Partners
Norwegian Transaction Market

18
                          Pangea Outlook Norway 2020   Pangea Property Partners
Norwegian transaction market                                             SBB takeover triggers second highest volume ever of NOK ~97bn

                         TRANSACTION MARKET 2017                                               TRANSACTION MARKET 2018                                                TRANSACTION MARKET 2019
          No. of transactions         Transaction volume   Foreign buyers     No. of transactions    Transaction volume   Foreign buyers         No. of transactions              Transaction volume                Foreign buyers

              302 deals                NOK 87bn                 22 %            273 deals              NOK 94bn              18 %                   257 deals                       NOK 97bn                             22 %

                                     NORWEGIAN TRANSACTION V OLUME (2010 - 2019)                                                                     TRANSACTION V OLUME BY SECTOR (2019)

                                                                                                                                                                             Other 9 %
        140
                                 Average: NOK 42bn                                 Average: NOK 95bn
                                                                                                                                           Land/Development 13 %

        120
                                                                                                                                                                                                                Office 45 %
                                                                                                                                                 Residential 5 %                   NOK
                                                                                                                                                      Hotel 3 %                    97bn

        100                                                                                                                                      Logistics/Industry
                                                                                                                                                        8%

                                                                                                                                                                           Retail 17 %
        80
NOKbn

                                                                                                                                                    TRANSACTION VOLUME BY INVESTOR TYPE (2019)

        60                                                             123
                                                                                                                                                 Divestment (0 to -50 %)                                       Acquisition (0 to +50 %)

                                                                                                                           Private companies
                                                                                                       94         97
                                                                                               87
        40                                                                                                                 Listed companies1)
                                                                                   72
                                                                                                                            Funds/Syndicates
                                                           54
                                         51
                                                                                                                                  Institutions
        20      43
                                                     36
                                                                                                                                       Other
                                25

                                                                                                                                   Unknown
          -
                2010        2011        2012        2013   2014        2015       2016        2017     2018      2019                        -50%     -40%     -30%      -20%   -10%        0%   10%     20%       30%      40%     50%

                                                                                                                                                                      Norwegian investors           Foreign investors
                                                           Volume (NOKbn)

                                                                                                                                                                                                 1) Includesconstruction companies
                                                                                                                                                                                                           Source: Pangea Research
19
                                                                                                                                                    Pangea Outlook Norway 2020                     Pangea Property Partners
Top Norwegian transactions                                                         Top ten making up ~36 % of total transaction volume in 2019

                                                                                                                                             Est. value     Area          Value/sqm                                      Cross-
      #         Date       Buyer                                Seller                                Asset(s)                                                                           Est. yield    Main type
                                                                                                                                              (NOKm)       (sqm)            (NOK)                                        border

      1      Dec-19      SBB i Norden                        Hemfosa Fastigheter                   Norwegian share of Hemfosa portfolio       ~9,000        n.a.             n.a.           n.a.         Office             √

      2      Apr-19      DNB Livsforsikring                  SBB i Norden                          Dronning Eufemias gate 30                  ~4,490      ~46,200          ~97,200        ~3.80 %     Public sector         √

                         Whitehelm European                                                        Pioneer Public Properties AS1) and
      3      Oct-19                                          Pioneer Property Group                                                          ~4,0802)       n.a.             n.a.           n.a.        Education           √
                         Infrastructure Fund II                                                    Pioneer Management AS

      4      Nov-19      Urban Property                      Selvaag Bolig                         Selvaag Bolig's land bank                  ~3,400      ~337,800         ~10,100          n.a.          Land

                         Syndicate (Arctic) /                Søylen Eiendom, Stor-Oslo             Commercial areas at Sørenga, Barcode,
      5      Jan-19
                         Madison International               Eiendom, Tellus Eiendom               Bispevika and parking at Munch Brygge
                                                                                                                                              ~3,300      ~40,000          ~82,500          n.a.          Retail            √

                                                             H.I.G. Capital, Blackstone,
      6       Jul-19     Syndicate (Arctic)
                                                             Oslo Pensjonsforsikring
                                                                                                   Kongsberg Teknologipark                    ~3,050      ~175,000         ~17,700          n.a.         Office             √

                         Syndicate (Pareto) /
      7      Dec-19                                          Kruse Smith AS                        Kruse Smith Eiendom                        ~2,300        n.a.             n.a.           n.a.       Residential
                         Solon Eiendom

                         Syndicate (Pareto) /
      8      Aug-19                                          NCC Property Development              Valle Wood, Valle View and land plot       ~1,830      ~60,000         ~50,0003)         n.a.         Office
                         Union Real Estate Fund II

                                                             Syndicate (NRP) /
      9      Jan-19      Syndicate (NRP)
                                                             H.I.G Capital
                                                                                                   Raufoss Industripark                       ~1,800      ~238,000         ~7,600           n.a.        Industry            √

                                                                                                   Portfolio of 4 local centers and 2 land
      10      Jul-19     Ragde Eiendom                       Tristian Capital Partners
                                                                                                   plots4)
                                                                                                                                              ~1,540      ~100,000         ~15,400          n.a.          Retail            √

                        Top 10 (~36 % of total estimated transaction volume of NOK ~97bn)                                                    ~34,820      ~659,200        ~19,520 5)

 1) Portfolio   of ~170 preschools in Norway, Sweden and Finland                                                                                                                                                      Estimated values
 2)   Based on investment properties of NOK 5.3bn as of H1 2019 and 77 % lease income from Norwegian properties
 3)   Approximately value/sqm of 50,000 per sqm for the two office buildings under construction at the time of the transaction
 4)   Local retail centers with big box tenants in Ålesund, Tune, Sarpsborg and Grenland
 5)   Adjusted for transactions with unknown area (sqm)
                                                                                                                                                                                                           Source: Pangea Research
20
                                                                                                                                                                     Pangea Outlook Norway 2020       Pangea Property Partners
Norwegian transactions 2019                                    Active transaction market in all deal sizes

          2019 was another active year in terms of transactions, and total number of
          deals amounted to 257 with an underlying volume of NOK ~97bn

          Over the last three years, the transaction volume has stabilized around                                                                                      Norwegian part of
          NOK 90bn, and since the record year of 2015, the average deal size has                                                                                       Hemfosa portfolio
          increased every year                                                                             No. of transactions: 257

          The largest deals in 2019 were the public takeover of Hemfosa (Norwegian                     Transaction volume: NOK ~97bn
          share) and DNB Liv’s acquisition of DNB HQ at a yield close to 3.80 %

          A new strategic trend this year for construction companies was to form a                   Average transaction size: NOK ~376m
          separate entity for land banks
          – Selvaag Bolig sold their land bank to Urban Property
          – Veidekke announced that they will either sell their land bank or form a
            separate listed company

                                                                                                                                                   DNB-building

     50                   100                     200                     400                    800                 1,600                 3,200                   6,400                   12,800

                        Smaller                                                   Mid range                                                           Large
                125 transactions (58 %)                                     64 transactions (33 %)                                             16 transactions (9 %)
                      < NOK 200m                                                NOK 200 – 800m                                                      > NOK 800m

                                                                                                                                                                                Source: Pangea Research
21
                                                                                                                                      Pangea Outlook Norway 2020           Pangea Property Partners
Property Segments

22
                     Pangea Outlook Norway 2020   Pangea Property Partners
Oslo and Stockholm office markets                                               Values driven by rental growth in the years to come

                                                    OSLO                                                                                               PRIME RENT AND YIELD DEV ELOPMENT

                                                                                                                               190                                                                                              7.0 %
                                            2017            2018        2019       2020E

     Prime yield (%)                       3.75 %          3.80 %      3.75 %      3.75 %                                      180                                                                                              6.5 %
                                                                                                                                                                                                       +7 %

     Prime rent (NOK/sqm)                   4,250           4,500       4,900       5,250
                                                                                                                               170                                                                                              6.0 %

                                                                                                                                                                                  +19 %
     Total vacancy (%)                     7.10 %          6.20 %      5.60 %      6.00 %
                                                                                                                               160                                                                                              5.5 %
                                                                                                                                                                                                                  +12 %
     Inner city vacancy (%)                4.40 %          4.20 %      3.50 %      3.80 %

                                                                                               Prime rent (index 100 = 2010)
                                                                                                                               150                                                                                              5.0 %
     Value/sqm (NOK)1)                     98,000          109,000     120,000     129,000

                                                                                                                                                                                                                                        Prime yield (%)
                                                                                                                               140                                                                                              4.5 %

                                               STOCK HOLM
                                                                                                                                                                                             +17 %

                                                                                                                               130                                                                                              4.0 %

                                            2017            2018        2019       2020E
                                                                                                                               120                                                                                              3.5 %
     Prime yield (%)                       3.40 %          3.35 %      3.25 %      3.25 %

                                                                                                                               110                                                                                              3.0 %
     Prime rent (SEK/sqm)2)                 6,300           6,800       7,100       7,300

     Total vacancy (%)                     7.60 %          7.60 %      8.00 %      9.00 %                                      100                                                                                              2.5 %

     Inner city vacancy (%)                2.25 %          2.25 %      2.75 %      3.00 %
                                                                                                                               90                                                                                               2.0 %
                                                                                                                                     '10   '11   '12      '13       '14    '15     '16     '17        '18       19       '20E
     Value/sqm (SEK)1)                    145,000          150,000     155,000     160,000
                                                                                                                                                 Oslo prime rent                                 Stockholm prime rent
     1) Assumed    owner’s cost of 8 % of GRI
     2) Rents   per NLA converted to rents per GLA for comparability                                                                             Oslo prime yield                                Stockholm prime yield

                                                                                                                                                                          Source: Pangea Research, Dagens Næringsliv - Eiendomspanelet
23
                                                                                                                                                                    Pangea Outlook Norway 2020              Pangea Property Partners
Oslo office market                                   Solid rental market and increasing net supply in coming years

     Stable Oslo office transaction market the last three years with average volume of
                                                                                                                                                                                    OSLO PRIME OFFICE
     NOK ~20bn and an average ~50 % share of total transaction volume in Oslo

     After a ten year period of gradually increasing rents and yield compression, prime objects
     now achieve NOK ~125,000 / sqm                                                                                               6,000                                                                                                                       130

                                                                                                                                  5,000                                                                                                                       110

                                                                                                                                                                                                                                                                    Value (NOK ‘000/sqm)
                                                                                                           Gross rent (NOK/sqm)
     Conversion of properties is still in a falling trend and there are several development
     projects with expected completion in the next two years, especially in the eastern office                                    4,000                                                                                                                       90
     clusters Bryn/Helsfyr and Økern/Hasle/Løren
                                                                                                                                  3,000                                                                                                                       70
     – A number of contracts have been signed to these new projects as tenants appreciate
       modern premises close to public transportation hubs at a significantly lower price than                                    2,000                                                                                                                       50
       central Oslo
     – The completion of many new office buildings could trigger a number of divestments in                                       1,000                                                                                                                       30
       the next two years
                                                                                                                                      0                                                                                                                       10
     The overall rent levels will grow at a rate of approximately ~4 % in 2020, and prime rent                                                  '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20F

     is expected to increase by ~7 % in 2020. Going forward it is expected that the prime                                                                                               Gross rent (l.a.)           Value (r.a.)
     yield will remain at ~3.75 %

                          OSLO OFFICE TRANSACTION V OLUME                                                                                                                           OSLO OFFICE SUPPLY

              30                                                                                     90%                                         350

              25                                                                                     75%                                         300

                                                                                                                                                 250
              20                                                                                     60%

                                                                                                                                     Sqm ‘000
      NOKbn

                                                                                                                                                 200
              15                                                                                     45%
                                                                                                                                                 150
              10                                                                                     30%
                                                                                                                                                 100

              5                                                                                      15%                                          50

              0                                                                                      0%                                            0
                   2013    2014            2015          2016           2017           2018   2019                                                       '10      '11      '12       '13         '14        '15        '16         '17      '18   '19E   '20E

                          Oslo office volume (l.a.)     Share of total Oslo volume (r.a.)                                                                                  Net supply                  Conversion              Absorption

                                                                                                                                                 Source: Pangea Research, Dagens Næringsliv - Eiendomspanelet, Eiendomsspar – Oslostudiet 2019
24
                                                                                                                                                                                 Pangea Outlook Norway 2020                        Pangea Property Partners
Regional office markets                                Decent outlook for all regional markets

       Bergen                                                       Trondheim                                                    Stavanger

     Total vacancy                                       ~8.50 %    Total vacancy                                      ~6.00 %   Total vacancy                                      ~11.50 %

     CBD vacancy                                         ~5.20 %    CBD vacancy                                        ~3.90 %   CBD vacancy                                          ~8.00 %

     Prime rent (NOK/sqm)                                  ~3,000   Prime rent (NOK/sqm)                                ~2,300   Prime rent (NOK/sqm)                                  ~3,000

     Prime yield                                         ~4.00 %    Prime yield                                        ~4.50 %   Prime yield                                          ~4.75 %

      On the supply side, lower volume of office construction        The general vacancy in Trondheim has decreased in             Stavanger has seen a substantial decline in
      combined with several office conversion projects               recent years, despite a high volume of new-build’s and        unemployment levels the recent years. With a higher oil
      contributes to a decrease in total vacancy. Supply side        moderate conversion levels in the last five years             price and cheaper Norwegian krone, the optimism is
      growth is not expected until 2021                                                                                            high in the region
                                                                     Supply growth has led to significant discrepancy
      The city center has seen the largest increase in rents, but    between city center vacancy (~3.90 %) versus less             With low unemployment and moderate levels of supply
      with the expected limited growth in supply side, rents                                                                       growth in the office market we expect the vacancy rate
                                                                     modern periphery objects (~9.30 %)
      will likely increase across-the-board going forward                                                                          to continue to decline throughout 2020
                                                                     We expect that lower supply growth going forward will
      Due to shortage of office properties on the market, solid                                                                    The city center experiences high demand and relatively
                                                                     contribute to a general increase in office rents in 2020
                                                                                                                                   low vacancy rates, which is expected to create rental
      outlooks and high investor appetite has not lead to high
                                                                                                                                   growth in the best locations going forward
      transaction volumes

                                                                                                                                                    Source: Pangea Research, DNB Næringsmegling
25
                                                                                                                                 Pangea Outlook Norway 2020        Pangea Property Partners
Retail market (1/2)                         Still high transaction activity, but shopping centers face structural issues

                                             COMMENTS                                                                              TOTAL RETAIL TRANSACTION V OLUME

                                                                                                                    50                                                                                                   50%
     Prime shopping center and high street yields have increased to ~4.50 % and ~4.00 %
     respectively, while regular shopping centers can see yield levels well above 6.00 %
                                                                                                                    40                                                                                                   40%
                                                                                                                                         33%
     High street rents have generally decreased over the last year but the best locations still
     obtain about NOK 25,000 / sqm                                                                                  30                                                                                                   30%

                                                                                                            NOKbn
                                                                                                                                                          20%
     Retail accounted for about NOK~17bn in transaction volume in 2019, corresponding to                                                                                     18%                              17%
                                                                                                                    20                                                                           16%                     20%
     approximately 17 % of the total volume of NOK 96.5bn
                                                                                                                         10%

     The 40 largest shopping centers in Norway, without known extensions, had slightly positive                     10                                                                                                   10%

     turnover growth of 0.7 % in 2019 vs. 2018:
                                                                                                                          6              41                15                 15                  15           17
                                                                                                                     0                                                                                                   0%
     – As tenants usually have CPI-adjusted minimum rents and turnover growth has been
                                                                                                                         2014           2015              2016               2017               2018          2019
       lagging, occupancy cost ratios have increased significantly
     – Higher occupancy cost ratios negatively affect valuations through lower estimated rents                                     Retail volume (l.a.)     Share of total transaction volume (r.a.)
       and/or higher yields

     Traditional retail is still by far the largest shopping channel for Norwegian consumers but are                          TOTAL SHOPPING CENTER TRANSACTION V OLUME
     facing tough challenges from changing consumer preferences and e-commerce:                                     50                                                                                                   100%

     – Physical shopping is still able to differentiate itself with traits like instant gratification and
       “human touch”                                                                                                40                                                                                                   80%
                                                                                                                                        67%
     – Retail destinations that offer something that cannot be consumed online will outperform
       going forward                                                                                                30                   28                                                                              60%

                                                                                                            NOKbn
     – Closer integration between physical stores and online retailers will be more and
                                                                                                                         41%                                                                     41%
       prevalent; physical stores strengthening online shopping and vice versa                                                                            36%
                                                                                                                    20                                                                                                   40%
                                                                                                                                                                             29%
     In 2019, shopping centers accounted for only 19 % of the retail volume, compared to 41 %,                                                                                                                19%
     29 % and 36 % in previous years, further indicating a mismatch in valuation and price                          10                                                                                                   20%
                                                                                                                                                            5                                     6
     expectations between sellers and buyers                                                                                                                                   4
                                                                                                                          2                                                                                    3

                                                                                                                    0                                                                                                    0%
     The most noteworthy retail transaction in 2019 was Madison International and Arctic’s
                                                                                                                         2014           2015              2016               2017               2018          2019
     acquisition of 40,000 sqm of commercial areas at Sørenga, Barcode, Bispevika and Munch
     Brygge for NOK 3.3bn (NOK ~82,500 / sqm)1)                                                                                  Shopping center volume (l.a.)       Share of total retail volume (r.a.)

                                                                                                                                                                                    1)Includes parking facility at Munch Brygge
                                                                                                                                                                                     Source: Pangea Research, Kvarud Analyse
26
                                                                                                                                                 Pangea Outlook Norway 2020                       Pangea Property Partners
Retail market (2/2)                                                     Stock market may be anticipating write-downs with pricing well below book values

                                          TOTAL RETURN, RETAIL REAL ESTATE SECTOR (LAST 5Y)                                                                                            PRICE / EPRA NAV DEVELOPMENT (LAST 5Y)

                        200%                                                                                                                                    1.4x
                                                                                                                               PREX Property
                        180%                                                                                                          179 %

                        160%
                                                                                                                                                                1.2x
                                                                                                                          Atrium Ljungberg
                        140%                                                                                                                                                                                                                         Atrium Ljungberg
                                                                                                                                     131%
                                                                                                                                                                                                                                                                1.08x
                        120%
                                                                                                                                                                1.0x
                        100%
                                                                                                                                                                                                                                                            Klépierre
                         80%                                                                                                                                                                                                                                   0.85x
     Total return (%)

                                                                                                                                   Olav Thon

                                                                                                                                                 P / EPRA NAV
                         60%                                                                                                                                    0.8x                                                                                          Citycon
                                                                                                                                        48 %                                                                                                                    0.74x
                         40%                                                                                                        Klépierre
                                                                                                                                                                                                                                                                URW
                                                                                                                                        20 %
                                                                                                                                                                                                                                                                0.65x
                         20%                                                                                                          Citycon                   0.6x
                                                                                                                                         10 %                                                                                                               Olav Thon
                          0%                                                                                                                                                                                                                                    0.55x
                                                                                                                                         URW
                                                                                                                                        -18 %                                                                                                             Hammerson
                         -20%
                                                                                                                                                                0.4x                                                                                          0.45x
                                                                                                                                  Hammerson
                         -40%                                                                                                         -43 %

                         -60%
                                                                                                                                                                0.2x
                         -80%
                                                                                                                               Intu Properties                                                                                                         Intu Properties
                                                                                                                                        -91 %                                                                                                                   0.15x
                        -100%

                        -120%                                                                                                                                   0.0x
                            Jan-15   Jul-15   Jan-16   Jul-16   Jan-17   Jul-17   Jan-18   Jul-18   Jan-19   Jul-19   Jan-20                                           Q1-16   Q3-16    Q1-17    Q3-17    Q1-18   Q3-18       Q1-19      Q3-19

                           Total return for Olav Thon Eiendomsselskap ASA has been 48 % over the last five years –                                                Olav Thon Eiendomsselskap ASA has been trading at discounts of around 35 % to 50 %
                           well above its European retail real estate peers but significantly below the Nordic real                                               over the last five years but is a special case due to its limited stock liquidity
                           estate sector as a whole (PREX Property: 179 %)
                                                                                                                                                                  Of the covered companies, only Atrium Ljungberg has a Price / EPRA NAV above 1.0x,
                           Atrium Ljungberg’s total return has been relatively good during the period, as they are                                                which may indicate that the stock market expects future write-downs in the sector
                           heavily exposed towards offices in Stockholm, which have been booming
                                                                                                                                                                  Hammerson, and Intu in particular, are trading at prices well below book values, and at
                           UK shopping center landlords Intu and Hammerson have seen negative total returns of                                                    the end of 2019, Intu warned that it may have to raise fresh equity after a string of
                           -91 % and -43 % over the last five years, underlining the sector’s problems                                                            retailer insolvencies

                                                                                                                                                                                                                                    1)”Figures as of January 15th 2020

                                                                                                                                                                                                                          Source: Pangea Research, Company reports
27
                                                                                                                                                                                                Pangea Outlook Norway 2020            Pangea Property Partners
Norwegian hotel market                                             Strong demand from international tourists drive the hotel market

     In the last few years, Norway has experienced a strong increase in inbound tourism due to
     a weakened currency, increasing number of direct flights and the allure of the Nordic
     countries. The main foreign markets are the U.S.A., Germany and Sweden                                                                                                      GUEST NIGHTS 2019YTD

     Domestic tourism is the largest market (72 %) with many Norwegians spending their                                                                                                                             1)
     holidays in their own country and taking domestic weekend trips. This trend is reinforced                                                                                                              U.S.A. 3.7%
                                                                                                                                                                                                            YTD: +19.0%
     by the aforementioned weak currency

                                                                                                                                                                                                                        Germany 3.1%
     In Oslo, despite several hotels opening in 2019, the strong increase in demand (+9.5%)                                                                                                                              YTD: +4.7%
                                                                                                                                                     Trondheim
     limited the expected fall in RevPAR to -2.2%. In 2020/2021 the market is expected to                                                             (+2.9%)                               Domestic:
     further absorb this new supply                                                                                                                                Other 14.8%               71.6%
                                                                                                                                                                   YTD: +5.9%               YTD: +5.0%
                                                                                                                                                                                                                            Sweden 2.8%
     The hotel transaction volume in 2019 (NOK ~3.1bn) has been characterized by strong                                                                                                                                      YTD: -3.2%
                                                                                                                                     Bergen
     investors’ interest but a lack of product on the market. 2020 is expected to be a strong                                        (+8.2%)                                                                     U.K. 2.2%
                                                                                                                                                        Oslo
     year for the hotel segment with several large single assets transactions                                                                         (+9.5%)                                                    YTD: 1.9%
                                                                                                                                 Stavanger
                                                                                                                                  (+26.1%)                                                             China 1.8%
                                                                                                                                                                                                       YTD: 3.0%

                                                 K EY FIGURES                                                                                               HOTEL TRANSACTION V OLUME

 YTD – November 2019                               Oslo            Bergen         Trondheim          Stavanger

 Hotels                                              73                 42                22                 23
                                                                                                                             6                                                                                                            6%
 Room nights available                        4,688,672         2,162,443          1,111,205          1,133,638

     vs. last year                                10.7%              5.3%               3.3%             12.9%               5                                                                                                            5%

 Room nights sold                             3,349,028         1,373,613            759,209           677,482
                                                                                                                             4                                                                                                            4%
     vs. last year                                 9.5%              7.3%               3.0%             24.8%

                                                                                                                     NOKbn
 Occupancy                                        71.4%             63.5%              68.3%             59.8%               3                                                                                                            3%
     vs. last year (bps)                            -0.8               1.2               -0.2               5.7
                                                                                                                             2                                                                                                            2%
 RevPar                                             753                619               673                545

     vs. last year                                -2.2%              4.1%              10.0%             11.0%
                                                                                                                             1                                                                                                            1%
     CAGR (2015-2018)                             2.7 %             -5.0 %             6.1 %             -3.1 %
                                                                                                                                        1               3               5          3               3               1             3
                                                                                                                             0                                                                                                            0%
 Expected new rooms in 2020                         621    none identified    none identified   none identified                       2013            2014            2015        2016           2017            2018           2019

 RevPAR Outlook                                                                                                                                Hotel transaction volume (l.a.)   Share of total transaction volume (r.a.)

      1)   American tourists potentially over represented in the statistics as many hotels register guests booking
                                                                             through OTA as Americans by default                                                   Source: Pangea Research, SSB, Statistikknett (numbers as at Nov-19)
28
                                                                                                                                                                 Pangea Outlook Norway 2020                 Pangea Property Partners
Logistics market                                              Strong underlying fundamentals and investor interest, but few assets in play

     The logistics market is still going strong, and even though the transaction volume is down
                                                                                                                                                                                                      GREATER-OSLO RENT LEV ELS
     by -43 % from 2018 to 2019, this can largely be explained by heavy shortage of supply

     Logistics is an emerging segment as e-commerce continues to conquer market shares
                                                                                                                                                              1,400
     – E-commerce experienced an annual growth of 11 % from 2010 to 2018                                                                                                      1,250
                                                                                                                                                              1,300
                                                                                                                                                                                              1,200            1,200          1,200
     Appetite across the board with tenants seeking new locations and logistics developers                                                                    1,200
                                                                                                                                                                                                                                               1,100
     searching for land, which in turn has surged prices of land in the outskirts of Oslo near E6                                                                                                                                                                 1,050
                                                                                                                                                              1,100

                                                                                                                                                  NOK / sqm
     Prime yield for logistics assets with long tenure and high degree of tenant customization                                                                1,000

     is still ~4.70 % and rent levels have remained fairly stable the last year                                                                                900
                                                                                                                                                                                                                                                                                 850

     – Rent increase is expected for top locations in 2020                                                                                                     800

     Yet to see the full potential of this segment, as it is expected that both construction and                                                               700

     investment activity will intensify in the next couple of years as the market lag will                                                                     600
     gradually resolve                                                                                                                                                    Groruddalen          Ski           Skedsmo        Lørenskog       Oslo south      Gardermoen/         Vestby
                                                                                                                                                                                                                                                               Kløfta

                    E-COMMERCE TURNOV ER, EX CL. TRAV EL AND SERV ICES                                                                                                                          LOGISTICS TRANSACTION V OLUME

                                                              +137 %
             30                                                                                                                                                          20                                                                                                              20%

             25                                                                                                    23
                                                                                                        22
                                                                                                                                                                         15                                                                                                              15%
                                                                                            19
             20
                                                                                16
                                                                                                                                        15
     NOKbn

                                                                                                                                                                 NOKbn
                                                                    14                                                      14
             15                                                                                                                                                          10                                                                                                              10%
                                                        12
                               10           11
                  10
             10
                         +5%          +8%        +10%        +16%        +17%        +16%        +14%        +6%                 +11%                                    5                                                                                                               5%
             5
                                                                                                                                                                                  2               8               8           13              7              17             7
             0                                                                                                                                                           0                                                                                                               0%
                                                                                                                                  1)         1)
                  2010         2011         2012    2013        2014        2015        2016        2017           2018   2018 T4 2019 T4                                        2013           2014            2015         2016           2017            2018          2019
                                                                                                                                                                                      Logistics transaction volume (l.a.)     Share of total transaction volume (r.a.)

                                                                                                                                                                                                                                                                  1)”T” refers to tertiary

                                                                                                                                                                                                                                                         Source: Pangea Research, SSB
29
                                                                                                                                                                                                       Pangea Outlook Norway 2020                      Pangea Property Partners
Property Investors

30
                      Pangea Outlook Norway 2020   Pangea Property Partners
Institutions                                  Total holdings of NOK ~170bn and large net buyers in 2019

      The ten largest pensions funds in Norway hold real estate investments of approximately
                                                                                                                                                 PENSION FUNDS’ REAL ESTATE ALLOCATION 2)
      NOK ~165bn and have a combined real estate allocation of ~8 % of total assets

      KLP is the largest fund and has the biggest real estate holdings in absolute terms with
      current real estate investments of NOK ~70bn, while OPF is most real estate heavy with                                      80                                                                                             20%

      ~20 % of total holdings
                                                                                                                                  60                                                                                             15%

      According to Pangea’s institutional outlook1), institutions rank real estate as the second

                                                                                                                          NOKbn
      best investment alternative, only surpassed by stocks                                                                       40                                                                                             10%

      Norwegian institutions have been net sellers since 2015, but were large net buyers in                                       20                                                                                             5%

      2019. 40 % of institutions report that they will increase property holdings while only 7 %
                                                                                                                                  0                                                                                              0%
      will decrease holdings1)

      Perhaps the most prominent single-asset transaction in 2019 was DNB Livsforsikring’s
      acquisition of the DNB HQ for NOK ~4.5bn
                                                                                                                                                         Real estate holdings (l.a.)    Share of AUM (r.a.)

 1) Based     on 15 institutional investor participants. Final ranking based on average scores.

                                                                                                                                                   Selected Institutional Property Transactions 2019
                                         TRANSACTION V OLUME (2015 -2019)
                                                                                                                                                                                                                  Est. Value    Area
                                                                                                                       Property                       Buyer                                Seller
                                                                                                                                                                                                                   (NOKm)      (sqm)

                                                                                                                       Dronning Eufemias gate 30      DNB Livsforsikring                   SBB i Norden             ~4.500     ~46,200
              20
                                                                                                                       Scandic Ørnen                  Oslo Pensjonsforsikring              OBOS Eiendom             ~800       ~19,000
              15
                                                                                                                       Krinkelkroken 1                DNB Scandinavian Property Fund       Nordea Liv                n.a.      ~10,000

              10
      NOKbn

                                                                                                                       Ranheimsveien 9                KLP Eiendom                          Kaisa Holding et al.     ~500       ~19,300
                                                                                                                 3.9
               5                                                                                                       Brynsalléen 2                  Capman Nordic Real Estate Fund II    KLP Eiendom               n.a.      ~17,600
                                                                                                    0.1
               0                                                                                                       Leif Tronstad plass 7          Viken Fylkeskommune                  DNB Livsforsikring       ~195       ~2,200
                                                                              -0.5
                                  -1.7                  -1.6                                                           Philip Pedersens vei 20        Clarksons Platou Oslo Opportunity    Oslo Areal                n.a.      ~10,200
              -5
                           2015                  2016                  2017                  2018         2019

                                                    Acquisitions    Divestments      Net

                                                                                                                                                                                2) According to most recent reporting (2018 - Q3 2019)
                                                                                                                                                                                                              Source: Pangea Research
31
                                                                                                                                                           Pangea Outlook Norway 2020                     Pangea Property Partners
Listed companies                               Holdings of NOK ~118bn and estimated investment capacity of NOK ~17bn

     Current LTV’s range from 39 % to 44 % with an aggregated LTV target of ~48 % 1),
                                                                                                                             LTV AND IMPLIED INV ESTMENT CAPACITY
     implying total additional investment capacity of NOK~17bn
     – Entra constitutes the bulk of this with an implied investment capacity of NOK ~10bn

     All three companies have provided investors solid returns for 2019, and comfortably beat         60%                                                                                                         20
     the OSEBX index, shown by their surge of 29 % on average throughout the year
                                                                                                      50%                                                                                                         16

     Norwegian Property has further reduced their presence in Stavanger after selling off a
                                                                                                      40%                                                                                                         12

                                                                                                                                                                                                                       NOKbn
     large portion of their remaining portfolio in the city during 2019
                                                                                                      30%                                                                                                         8
     – Simultaneously, Norwegian Property has strengthened their position in the office
       clusters of Aker Brygge and Nydalen in Oslo, while also expanding to new parts of the
                                                                                                      20%                                                                                                         4
       city through their acquisition of Lille Grensen 7

     As a part of their strategy of focusing on city center assets, Entra purchased                   10%                                                                                                         0
                                                                                                                         Entra                Norwegian Property         Olav Thon               Aggregated
     Møllendalsveien 6-8 in central Bergen, further concentrating their portfolio                                                                                     Eiendomsselskap
                                                                                                                                                                                     1)

     – This indicates Entra’s belief in the regional office segment and their confidence in the                                  LTV (l.a.)     Target LTV (l.a.)   Implied investment capacity (r.a.)

       property market of Bergen                                                                    1) Target   LTV for OLT is est. 45 % based on current and max LTV of 39 % and 50 %, respectively

                               TRANSACTION V OLUME (2015 -2019)                                                    NORWEGIAN REAL ESTATE PERFORMANCE (LAST 2Y) 2)

             6                                                                                         45%
                                                                                                                                                                                           1Y Return
                                                                                                       35%
             4
                                                                                                       25%
             2                            1.2
     NOKbn

                                                                                 1.0                   15%
                         0.4                                                                  0.5

             0                                                                                          5%

                                                                                                        -5%
             -2
                                                             -1.9                                     -15%

             -4                                                                                       -25%
                  2015             2016               2017                2018         2019              Jan-18           Apr-18          Jul-18       Oct-18       Jan-19      Apr-19       Jul-19      Oct-19       Jan-20

                                     Acquisitions   Divestments     Net                                          Entra              Olav Thon             Norwegian Property             PREX Norway          OSEBX

                                                                                                            1) Target    LTV for OLT is est. 45 % based on current and max LTV of 39 % and 50 %, respectively
                                                                                                                                                                             2) Figures as of January 10th 2020

                                                                                                                                                                   Source: Pangea Research, Thomson Reuters
32
                                                                                                                                              Pangea Outlook Norway 2020                   Pangea Property Partners
Norwegian property funds and syndicates                                               Active buyers with current holdings of NOK ~155bn

     Funds and syndicates are highly active buyers in the Norwegian property market,                                                                                                                          1)
     accounting for ~29 % of total acquisition volume in 2019                                                                              WEIGHTED IRR ON SYNDICATES, BY SEGMENT

     The total volume of syndicate holdings amounted to NOK ~105bn by the end of 2019
     – Syndicates managed by Pareto and Arctic Securities constitute ~52 % of overall                              25%
       syndicate holdings                                                                                                        21%
                                                                                                                   20%
     Syndicates holding property in the industry segment have earned the highest IRR on a
     weighted average basis, reaching an IRR of 21 %, followed by the logistics and office                                                    15%
                                                                                                                                                         14%        14%

                                                                                                    Net IRR (%)
     segment with 15 % and 14 % IRR respectively                                                                   15%                                                                                Average: 13 %
                                                                                                                                                                                  12%

     – The weighted average IRR across all property segments amounts to 13 %                                       10%
                                                                                                                                                                                               9%
                                                                                                                                                                                                           8%
     Of all equity invested through syndicates, approximately 66 % has been invested into the
     office segment, making it the most popular segment by far                                                        5%
                                                                                                                                                                                                                       2%

     Norwegian real estate funds have expanded at a steady pace, growing ~30 % since 2017                             0%
     to reach a total of NOK ~50bn in holdings in 2019                                                                          Industry     Office    Logistics    Other2)   Combination Residential Office/retail   Retail

     – In 2019, Norwegian property funds accounted for 9 % of total transaction volume
                                                                                                     1) Annual            IRR weighted by paid in capital. Based on 62 syndicates with a total GAV of NOK ~32bn
                                                                                                     2)           Typically includes care homes and education

                                  SYNDICATE HOLDINGS                                                                                                        FUND HOLDINGS
                                                                            Total volume                                                                                                                        Total volume
                                                                            NOK ~105bn                                                                                                                          NOK ~50bn
             30
                                                                                                                           15

             20
                                                                                                                           10
     NOKbn

                                                                                                                  NOKbn
             10                                                                                                            5

             0                                                                                                             0

                                                                                                                                                               Source: Pangea Research, Thomson Reuters, Company reports
33
                                                                                                                                                      Pangea Outlook Norway 2020                Pangea Property Partners
Private companies                               Consolidation trend expected to continue in 2020

     Highly diverse group of investors
     – Includes family offices gradually shifting towards investing through funds and
                                                                                                                            Private sector performance
       syndicates

     Active investor group with average annual net acquisition volume of NOK -11bn for the
                                                                                                        Borrowing cost               Rental income            Property fair value
     last 5 years

     – Net sellers since 2015 as low yields make value realization an attractive option
     – Have an accumulated net acquisition volume of NOK -55bn through the period of
       2015-2019

     Long term consolidation trend where larger firms are expanding is expected to continue
     in 2020
                                                                                                   Low yield and high rental income increase have given good returns in 2019 for private
     – Benefits from a more diversified property portfolio, reducing risk of single assets and     companies
       achieving economies of scale
     – Property owners also see the benefit of owning whole areas where they can adopt a           Expected rental increase indicates positive returns for 2020, but there is more
       more holistic approach to different types of tenants in order to develop the area           uncertainty concerning the yield levels although expected to remain stable
       around the property

                                TRANSACTION V OLUME (2015 -2019)
                                                                                                                          Expected application of funds

             40
                                                                                                         Deleveraging                  Dividends                 Reinvestment
             20

              0
     NOKbn

                                            -7                                   -7
             -20                                              -14                            -12
                          -15

             -40                                                                                   Little incentive to reduce leverage as the yield curve is flat and margins are expected to
                                                                                                   remain stable in 2020
             -60
                   2015              2016              2017               2018        2019
                                                                                                   Real estate is still considered a favorable asset class and dividends are likely to be
                                      Acquisitions   Divestments    Net                            reinvested in property development and acquisitions, but through syndicates and funds

                                                                                                                                                                      Source: Pangea Research
34
                                                                                                                              Pangea Outlook Norway 2020          Pangea Property Partners
International real estate funds                                                      Property funds increasing in number and size

      Despite global political and economic uncertainty, more capital was raised in 2019 than in
                                                                                                                                                   FUNDS RAISED & NUMBER OF FUNDS CLOSED
      each of the last 10 years

      Fewer funds have secured a larger stake of total invested capital, indicating consolidation
                                                                                                                               60                                                                                               150
      – Investors look to the more established managers with proven track records
                                                                                                                               50                                                                                               125
      In September 2019, Blackstone closed its USD 20.5bn opportunistic fund Real Estate
      Partners IX, which is the largest private equity real estate vehicle ever raised                                         40                                                                                               100

                                                                                                                                                                                                                                      # of funds
                                                                                                                       USDbn
                                                                                                                               30                                                                                               75
      Opportunistic real estate investments seem to be the most popular strategy during this
      late stage of the market cycle, accounting for more than 50 % of the total capital in 2019                               20                                                                                               50

      The competition for core assets is tough in the Nordic market, and international investors                               10                                                                                               25

      typically look for more value-add and opportunistic investments                                                          0                                                                                                0
                                                                                                                                       Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19
      The prime yields are similarly low across the Nordic, but Norway stands out in terms of
      expensive financing and narrow yield spreads. Additionally, the added cost for                                                                        Sum of funds raised     Number of funds closed

      international investors of hedging against the NOK is high at the moment

                           PRIV ATE REAL ESTATE FUNDS BY STRATEGY                                                                             CAPITAL RAISED FOR PE REAL ESTATE BY TOP 50 1)

     100%                                                                                                                      400
                      35                        12.8                         100                       13
                                       4                                                                                                                                           +102 %
     80%                                                     1               100                       16
                      25
                                                 22                                                     6                      300
                      25                                                     89
     60%

                                                                                                                       USDbn
                                                                                                       49
                      85                                                     297                                               200
     40%
                                                 57
     20%                                                                                                                       100
                      65                                                     231                       36

      0%                                                                                                                                     177           224              271              281             333         358
            Total Funds in Market           Capital raised         Total funds in market      Number of funds closed               0
            as of Q3 '19, (USDbn)          in '19, (USDbn)           as of Q3 '19, (#)             in '19, (#)                              2014           2015             2016            2017             2018        2019
                              Opportunistic    Value Added       Core-plus     Core    Debt
                                                                                                                       1) Rolling       5Y fund raising by top 50 managers worldwide

                                                                                                                                                                                             Source: Pangea Research, PERE, Prequin
35
                                                                                                                                                             Pangea Outlook Norway 2020                  Pangea Property Partners
Nordic Listed Sector

36
                       Pangea Outlook Norway 2020   Pangea Property Partners
Nordic real estate equity markets                                                                           PREX Sweden country winner and strong logistics rush

                                                                                                    1)                                                                                                                                                  1)
                                                      NORDIC EQUITY MARK ETS (LAST 3Y)                                                                                                              NORDIC EQUITY SEGMENTS (LAST 3Y)

                    130%                                                                                                                                                     300%

                                                                                                                            PREX Sweden                                                                                                                                        PREX Logistics
                                                                                                                            1Y return: 67 %                                                                                                                                   1Y return: 125 %
                                                                                                                           3Y return: 121 %                                                                                                                                   3Y return: 276 %
                    110%                                                                                                                                                     250%
                                                                                                                           PREX Property
                                                                                                                            1Y return: 64 %
                                                                                                                           3Y return: 108 %
                                90%                                                                                                                                          200%

                                                                                                                                              Total return, incl. dividend
 Total return, incl. dividend

                                70%                                                                                                                                          150%
                                                                                                                                                                                                                                                                                PREX Office
                                                                                                                           PREX Norway                                                                                                                                         1Y return: 55 %
                                                                                                                           1Y return: 35 %                                                                                                                                    3Y return: 107 %
                                50%                                                                                        3Y return: 56 %                                   100%                                                                                             PREX Residential
                                                                                                                            OMX Nordic                                                                                                                                         1Y return: 68 %
                                                                                                                           1Y return: 34 %                                                                                                                                    3Y return: 104 %
                                                                                                                           3Y return: 46 %
                                30%                                                                                                                                          50%                                                                                                   PREX Retail
                                                                                                                                                                                                                                                                                  1Y return: 37 %
                                                                                                                                                                                                                                                                                  3Y return: 28 %

                                10%                                                                                                                                           0%                                                                                             PREX Construction
                                                                                                                                                                                                                                                                               1Y return: 48 %
                                                                                                                                                                                                                                                                               3Y return: 13 %

                           -10%                                                                                                                                              -50%
                              Jan-17         May-17   Sep-17   Jan-18   May-18   Sep-18   Jan-19   May-19   Sep-19    Jan-20                                                    Jan-17     May-17    Sep-17      Jan-18     May-18   Sep-18   Jan-19   May-19   Sep-19   Jan-20

                                      The overall listed Nordic property market has yielded a significant return the last three years,                                              The demand and performance of logistics and office properties has been great the last years due
                                      mostly driven by its largest market Sweden with a three year return of ~121 %                                                                 to yield compression and strong rental growth. Logistics companies like Sagax, Catena and Corem
                                                                                                                                                                                    have experienced a 3Y return of ~282%, 249% and 255%, respectively
                                      Although the property market has been solid in Norway as well, the Swedish listed sector is far
                                      more comprehensive in terms of segments and number of companies, and therefore reflects the                                                   In Norway, the listed companies are mainly exposed to office and retail, and with a 3Y return on
                                      overall property market to a greater extent                                                                                                   retail of ~28 %, it is evident why the Norwegian listed property sector is far behind its peers

                                      Considering the Norwegian property market is maturing fast, it is possible that we will see more                                              Construction companies have experienced challenges due to costly environmental focus,
                                      consolidation and company listings in the next 1-2 years among companies with ambitious growth                                                corrections in housing prices and regulatory restrictions. With the recent news of Veidekke
                                      targets                                                                                                                                       cultivating their business similar to NCC in 2016, and Selvaag Bolig selling off their land bank, it
                                                                                                                                                                                    could be the start of structural changes within the segment

                                                                                                                                                                                            1) Figures   as of January 15th 2020 with stock market observations from 01.01.2017 to 15.01.2020
                                                                                                                                                                                                                                                   Source: Pangea Research, Thomson Reuters
37
                                                                                                                                                                                                                          Pangea Outlook Norway 2020            Pangea Property Partners
Nordic listed property market size                                                         Total market cap of almost NOK ~755bn across the Nordics

                                                                                                        MARK ET CAP PER COMPANY

             80
                  75
                                                                                                                                                                                                                                 Sweden
             70

                                                                                                                                                                                                                                 Norway
             60         58    57

                                                                                                                                                                                                                                  Finland
                                     49
             50
                                           45
                                                                                                                                                                                                                                 Denmark
     NOKbn

                                                 41
             40                                        37
                                                              36

                                                                    29
             30                                                           27    26     25
                                                                                             21    20    20
             20                                                                                               18   18   18   17    16    15
                                                                                                                                                 13   13
                                                                                                                                                            11   10
             10                                                                                                                                                            7     6       6
                                                                                                                                                                                              5       4     4       4
                                                                                                                                                                                                                         3        2
                                                                                                                                                                                                                                       1        0.4
             0

             The Nordic listed sector grew by ~64 % the last year adjusted for listings/de-listings1)                                                                                  Market cap by country

             Especially Sweden and Finland have seen high pricing growth and the Finnish listed sector is now bigger than the Norwegian sector

             The Swedish sector is heavy in high performing segments such as logistics and office (PREX Logistics: +125 %, PREX Office: +55 %).
             In the Finnish sector, the fast-growing Kojamo is purely invested in rental apartments (PREX Residential: +68 %) and Hoivatilat in            Companies             3            27             3               3             36
             public sector real estate
                                                                                                                                                           Market cap
                                                                                                                                                                               ~51           ~621           ~62          ~21           ~755
             The takeovers of Hembla and Hoivatiltat by German Vonovia and Belgian Aedefica could possibly mean an exit of NOK ~22bn from                  (NOKbn)
             the Nordic listed sector, while SBB would grow to be the largest Nordic real estate company within social infrastructure after
             acquiring Hemfosa                                                                                                                             1Y %-change1)       +35 %         +67 %        +74 %         +48 %          +64 %

                                                                                                                                                                                                             1) Figures as of January 15th 2020

                                                                                                                                                                                                   Source: Pangea Research, Thomson Reuters
38
                                                                                                                                                                 Pangea Outlook Norway 2020                      Pangea Property Partners
Valuation                                      P / EPRA NAV has increased by ~37 % in the Nordics the last year

                                                                                                                      PRICE / EPRA NAV PER COMPANY

                    3.0x
                           2.8x   2.8x
                                                                                                                                                                                                                                                                       Sweden
                                         2.6x
                    2.6x

                                                                                                                                                                                                                                                                       Norway
                    2.2x                        2.1x   2.1x

                                                                                                                                                                                                                                                                        Finland
                                                              1.8x
     P / EPRA NAV

                    1.8x                                             1.7x
                                                                            1.6x   1.6x   1.6x   1.6x
                                                                                                        1.5x                                                                                                                                                           Denmark
                                                                                                               1.4x   1.4x   1.4x   1.4x   1.4x   1.4x   1.4x   1.4x
                    1.4x                                                                                                                                               1.3x   1.3x   1.3x
                                                                                                                                                                                            1.2x     1.2x
                                                                                                                                                                                                            1.1x    1.1x   1.1x   1.1x   1.1x
                                                                                                                                                                                                                                                 1.0x
                    1.0x

                                                                                                                                                                                                                                                         0.8x   0.8x    0.8x
                    0.6x
                                                                                                                                                                                                                                                                               0.6x
                                                                                                                                                                                                                                                                                        0.5x

                    0.2x

                      The P / EPRA NAV of the overall Nordic listed sector has increased by +37 % the last year, largely due to Swedish stocks being priced                                                        Weighted average P / EPRA NAV
                      +59 % higher than last year and making up ~85 % of the total Nordic market value

                      The Norwegian pricing has been driven by NPRO and Entra, and the Finnish market is currently being priced +74 % higher than last
                      year due to Kojamo’s stock price nearly doubling, and in turn contributing to the total P / EPRA NAV premium of ~62 %
                                                                                                                                                                                            Jan-19           0.7x             1.1x              0.8x            1.7x             1.0x
                      All countries except from Sweden suffer from small sample size, making it difficult to compare and be conclusive on the deviating
                      pricing between the sectors, such as the large discrepancy between Swedish and Norwegian book value pricing                                                           Jan-20           0.8x             1.5x              1.3x            1.6x            1.4x

                      During the last year, Victoria Park and Technopolis have been de-listed, and K2A, John Mattson, BoStad and K-Fastigheter have been
                                                                                                                                                                                            %-change        +14 %           +40 %           +62 %               -8 %           +37 %
                      listed

                                                                                                                                                                                                                                     Source: Pangea Research, Company reports
39
                                                                                                                                                                                                   Pangea Outlook Norway 2020                          Pangea Property Partners
Listings and takeovers                                                High M&A activity

                                                                                         PRICE 1) / EPRA NAV (2014 – 2019)                                                                                                    RECENT TAK EOV ERS

                1.3x

                                                                                              LISTINGS              TAKEOVERS                                                                                            Aedifica has acquired ~96% 3) of the
                                                                                                                                                                                                                         share capital in Hoivatilat at a premium
                                                                                                                                                                                                                         of      ~26% 4).         Hoivatilat’s          property
                1.2x                                                                                                                                                                                                     portfolio is EUR ~457m.

                           Oscar Prop. (SWE)                                                  Solon Eiendom (NOR)       Hoivatilat (FIN)              Kojamo (FIN)        Brinova (SWE)     K2A (SWE)
                               SEK 0.5bn                                                          NOK 1.5bn               EUR 0.2bn                       SEK 4.9bn         SEK 3.4bn        SEK 3.3bn               3) Includes shares already held by Aedifica
                1.1x                                                                                                                                                                                                 4) Premium to last trading day prior to tender offer announcement

                                           Entra (NOR)                                                     SBB (SWE)                                 Magnolia (SWE)                     John Mattson (SWE)
                                           NOK 32bn                                                         SEK 7.5bn                                     SEK 3.2bn2)                        SEK 6.1bn
 PRICE / EPRA NAV

                1.0x                                                                                                                                                                                                     Vonovia has acquired ~95% 5) of the
                                                                                                                                                                                                                         share capital in Hembla at a premium
                                                                                                                                                                                                                         of      ~11.5% 6).          Hembla’s           property
                                                                                                                                           Stendörren (SWE)             Nyfosa (SWE)
                                                                                                                                                                                                                         portfolio is SEK ~34bn.
                                                                                                                                              SEK 6.7bn                  SEK 15.4bn

                    .9x

                                                                    Tribona 30 % (SWE)
                                                                                                                                                                                                                     5) Includes shares already held by Vonovia
                                                                         SEK 3.0bn                                                                                                                                   6) Premium to B-shares last trading day prior to tender offer
                                                                                                                                                                                                                     announcement

                    .8x
                                                                                                D. Carnegie 50 % (SWE)       Sponda 100 % (FIN)
                                                                                                      SEK 9.4bn                   EUR 3.8bn
                                                                                                                                                                    Technopolis 100 % (FIN)                              SBB       has     acquired         ~92% 7)         of       all
                                                                                                                                                                            EUR 1.6bn                                    outstanding shares in Hemfosa at a
                    .7x                                                                                                                                                                                                  premium            of      ~23% 8).         Hemfosa’s
                                                                                                                                                  Victoria Park 81 % (SWE)              Stendörren 41 % (SWE)            property portfolio is SEK ~40bn.

                                                                                                                                                           SEK 12.5bn                         SEK 3.3bn

                    .6x                                                                                                                                                                                              7) Includes a share of ~6 % already held by Aedifica
                          Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19                    8) Premium to common shares last trading day prior to tender offer
                                                                                                                                                                                                                     announcement
 1) Average share price for the quarter
 2) Estimated values of ongoing project included

 Note: Values reflect underlying property value for the respective amount of shares acquired/listed

                                                                                                                                                                                                                         Numbers as of January 13th 2019
                                                                                                                                                                                                                Source: Pangea Research, Company reports
40
                                                                                                                                                                                        Pangea Outlook Norway 2020               Pangea Property Partners
You can also read