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ANNUAL REPORT
2023
This report presents an overview of our 2023 results, our achievements and our progress.

Overview from the CEO

Well positioned
for the next phase

The year just ended was dominated by major changes in the macroeconomic climate. This naturally also had a significant impact on the property market, in the form of higher interest rates, tighter financial markets and a fall in the value of all types of property. Despite this, Public Property Invest (PPI) is well positioned for the next phase of development.
Read the full article
1 E6 A0809
Establishment of the sustainability-linked bank facility of NOK 3.32 billion, which was entered into in spring 2023 with Nordea and Danske Bank.

Vision

Leaders in socially beneficial and essential property.

Ppi logo animasjon

December 31, 2023

Key Figures

307224
Gross Area (sqm)
48
Properties
27133
Value / sqm (NOK)
94%
CPI Adjustment
~1880
Gross Rent / sqm (NOK)
91%
Public Tenants
65.1%
Loan to value (EPRA LTV)
501
NOI (Net operating income) (MNOK)
5.21
WAULT (years)*
8336
Gross property value (MNOK)
187
Rental agreements
95%
Occupancy rate
*The WAULT assumes renewal of the contract with Oslo Metropolitan University with five years.

Passion

We are passionate about the quality of our buildings, and the experiences the buildings provide for their users. We are also passionate about the quality of our tenants. We believe that quality builds trust. Quality will always pay off in the long run!

Anton Jenssens gate 2, Tønsberg
How we build value
Our business strategy focuses on increasing PPI’s value to improve returns for shareholders. We’ve pinpointed eight key areas that we believe will elevate the group’s overall value, benefiting all shareholders. This increased value also builds a resilient and sustainable real estate company, aligning with the best interests of our tenants and the local community.
Build brand and trust with shareholders, tenants and the market
Utilize economies of scale
Ensure cash flow by extending lease contracts
Ensure continued control of financing
Develop current properties
Appropriate level of ESG work
Acquire more properties to build size
Preserve values and increase the standard of the properties

48 properties in
key cities central locations urban areas

Explore our properties ⎋
230426 Kart PPI clean
X
2
Bodø
X
3
Mo i Rana
X
2
Namsos
X
2
Hamar
X
1
Kristiansand
X
1
Florø
X
1
Narvik
X
2
Gjøvik
X
2
Arendal
X
5
Sarpsborg / Fredrikstad
X
5
Sandefjord
Tønsberg
X
3
Stavanger
Sandnes
X
1
TROMSØ
X
2
Leikanger
X
1
Sogndal
X
2
Lillehammer
X
1
Kongsvinger
X
4
Moss
X
2
Halden
X
5
Porsgrunn
Skien
X
1
Lillestrøm
X
2
Hønefoss

  • Who are working
    in our buildings

    Mellomvika 5, Mo i Rana
  • IMG 3029 Halden copy
    Courthouses
    Our courthouses are located in city center and an important part of the cityscape. The buildings have a symbolic meaning for the rule of law in Norway, and many of the courts are great signal buildings.
    NAV
    NAV buildings are all placed in city centre and contains mainly of office space. These buildings are office to a great number of public employees and are important meeting places for the agency and the inhabitants in need of their support.
    MG 5725
  • MG 5864 crop
    Police department
    The local police houses in Norway are a part of the public security for the population. It is important to PPI to develop these buildings in a long perspective.
    Municipalities and counties
    Our portfolio consists of buildings that are both historic and symbolic. Our tenants do an important work to keep the local politics and regulations.
    MG 5872
  • MG 5804 lysnet
    The Norwegian Tax administration
    The Tax administration is a tenant in several of PPI’s buildings and have both office space and space for meeting the population in our buildings.
    Other properties
    These buildings are city centre properties with multiple functions and private tenants, such as grocery stores, jewellery stores, banks, accounting – and lawyer companies.
    DJI 0013
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  • Rental income 2023

    Gross rent distribution
    The majority of our buildings are single-use buildings.
    Others are shared between public and private tenants.
    100

    Percentage split

  • Largest lease contracts

    Tenant Number of sqm Annualized rent 2023 CPI
    Police 55 669 108 330 651 91%
    Oslo Metropolitan University 27 095 52 746 861 100%
    National Courts 23 219 49 428 144 91%
    Norwegian Labour and Welfare Administration 22 001 41 347 592 89%
    Kristiansand Municipality 12 775 36 045 064 100%
    Norwegian Tax Administration 16 101 35 307 455 92%
    Norwegian Public Roads Administration 10 397 19 892 551 100%
    Statistical Research at Statistics Norway 12 265 19 682 713 81%
    State Administration 8 970 17 991 005 90%
    The Norwegian Directorate for Civil Protection 8 465 17 990 546 80%
    Various 110 267 179 370 399
    Sum / Weighted average 307 224 578 132 981 94%
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Grønnegata 122, Tromsø

Tenants

Lease agreements

We have a strong focus on increasing the cash flow and the weighted average unexpired lease term (WAULT) in the portfolio. The overview shows renegotiations and new lease agreements in 2023.
In 2023, seven existing lease agreements were successfully renegotiated, with 96% of rental income involving public tenants. The renegotiated agreements generate a total rental income of approximately 19 million over the lease duration. The average rent stands at NOK 1 620 per square meter, with a weighted average lease term (WALT) of 3.5 years for these seven contracts. Furthermore, five new lease agreements were entered into during 2023, with 26% of rental income involving public tenants. These agreements, with an average rent of NOK 1 741 per square meter, contribute with approximately NOK 4 million in additional rental income. The WALT for these new agreements is 11 years, positively impacting the portfolio’s overall WAULT.
Lease Agreements
We have the world’s best tenants; the Norwegian state and Norwegian municipalities.

Tenants

Tenant satisfaction

Developing good, long-term relations with our tenants is one of PPI’s most important policies. To achieve this, the company’s operations team and managers maintain a close dialogue with tenants throughout the year.
Tenant dialogue
The company meets twice a year with each individual tenant in our portfolio. The purpose is to review any changed requirements and needs relating to the tenancy, and to clarify tenants’ expectations of us as landlords. This provides a valuable insight into satisfaction levels among our tenants and helps ensure that the company develops in line with our tenants’ expectations. The ultimate aim is to increase the likelihood of tenants renegotiating their lease when it expires.
Tenant survey
PPI also takes part in an annual tenant survey through the NEMEET Customer Index. The survey asks tenants a range of questions on their satisfaction with their tenancy, the property, operation of common areas and their landlord.

The company takes the results of the survey into account when setting its goals for the next 12 months. These goals are intended to enable tenants to experience a predictable working day and seamlessly communicate with their landlord. The aim is to increase tenant satisfaction throughout the lease term, and thereby secure a higher score for customer satisfaction, in turn facilitating stable, long-term tenant– landlord relations.
Increased satisfaction
Results from the 2023 survey show that PPI’s relative position in the market has improved significantly from the previous year. The company is up three points in the CSI, while the market as a whole is down by three points. The company now has a score of 73, compared with a market average of 80. While this puts us “in the main ball park”, the company acknowledges that active efforts are required to further improve the score. According to feedback, one particular area we need to reinforce moving forward is strengthening our communication with and visibility among tenants.
Goals for 2023-2024
PPIs goal is to enhance communication with tenants leading to increased trust and strengthened relationships. The company intends to pursue this goal by:
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Building the Company’s brand.
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Sharing information about what the company is doing that benefits
the tenant, the property, and the environment.
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Actively working on adjusting tenant expectations regarding price, standards, and deliveries.
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Providing tenants with relevant information about the lease, the property, and daily operations.

Establishing the baseline for reducing our Co2 footprint

PPI’s board of directors has resolved that PPI must become a climate-neutral company within 2030. We will achieve this by continually reducing our properties’ carbon footprint through measures relating to climate shells, technical facilities and energy supply.

Due to its size and provider of buildings for public tenants, the group carries a significant social responsibility, and has a responsibility for spearheading the transformation of the industry in which it operates. This means refurbishing the buildings it owns instead of building new ones, and ensuring that its tenants achieve their goals and that it has environmentally aware and sustainable minded tenants.

The group has three focus areas within sustainability; climate and environment, social sustainability, and financial sustainability.

Read more about our goals

Development
– an important value driver

One of PPI’s goals is to add value by continuously developing our properties. To optimise utilisation, the company has initiated a wide-ranging review to identify the portfolio’s short- and long-term development potential.
Development

Potential revised upwards
Development of current properties is one of the strategies for increasing the value of the properties and the group. The group’s team has prioritized properties where public regulatory processes provoke attention, as well as properties with shorter time to contract expiration. This work can include upgrades of existing buildings, extensions, or new construction within both commercial and residential sectors.

Throughout 2022 and 2023, the development potential for 40% of PPI’s property portfolio has been surveyed. The conclusion is that up to 50 000 sqm of net potential is untapped, in addition there are currently three development projects where the company has not yet clarified the development potential.


Competent team
PPI has a diverse and expert team to assist in all development projects. This enables us to tailor teams to suit each unique project.

As a starting point, we engage local architectural teams who are thoroughly familiar with the local conditions and the municipality in question. We believe that this benefits both us and the local environment. PPI has developed effective methodologies for new development projects, including the use of fixed templates, an evaluation system and financial tools to enable us to work smart and cost-effectively.

The investment committee of the board provides recommendations for the board’s approval, with the board serving as the ultimate decisionmaker.


Sustainability front and centre
It is vital to take sustainability into account in all types of property development – whether refurbishments or newbuilds. PPI has ESG advisers who help ensure optimal delivery of sustainable solutions. You can read more about this in the separate section on sustainability

Financing

The group’s financing is diversified between bank and senior secured bonds.

The nominal interest-bearing debt of NOK 5 529 million as of year-end has a maturity structure with a weighted average time to maturity of 1.2 years. During 2023, the group’s interest-bearing debt decreased by NOK 203.5 million from NOK 5 733 million to NOK 5 529 million. The change in interest-bearing debt comprised a decrease in senior secured bonds of NOK 762 million and an increase of bank debt of NOK 625 million.
As a first step, the group’s debt financing strategy has been to use the bond market to enable swift and rapid growth. The following step has been to establish debt facility and great relationships with leading Nordic banks to secure attractive long-term financing. The latter was proven through the establishment of the group’s debt facility of NOK 2.7 billion during the summer of 2022. The third step in the debt financing plan has been to refinance maturing bonds with bank debt. Said strategy was demonstrated in June 2023 where the group refinanced three maturing bonds of NOK 762 million with bank debt. The debt facility was then expanded by NOK 625 million from NOK 2.7 billion to 3.3 billion.


Furthermore, as part of the group’s overall ESG-strategy, the bank debt facility was established as a sustainability-linked facility in 2023, with certain targets of energy- usage and monitoring. The group will be rewarded by reduced credit margin in the event of met targets. Likewise, the credit margin increases should the targets not be met. Approximately 60% of the group’s gross debt financing was sustainability-linked, and thus considered ”green”, as of 31 December, 2023.
Interest rates and corresponding maturity structure
Market interest rates increased substantially during 2023 where e.g. 3M NIBOR increased by 1.47 percentage points from 3.26% at year-end 2022 to 4.73% at year-end 2023. The group has a strategy of managing such interest rate risk through floating-to-fixed interest rate swaps and fixed rate bonds.

The group’s average interest rate as of 31 December, 2023 was 4.7%. The change in average interest rate mainly stems from higher market interest rates. As of 31 December, 2023, Public Property Invest’s fixed interest rates amounted to NOK 3 901 million, equivalent to 71% of total outstanding interest-bearing debt. Average time to maturity of hedges and bonds with fixed interest rates was 2.1 years.
Approximately 60% of the group’s gross debt financing was sustainability-linked, and thus considered ”green”, as of 31 December, 2023.
Graph 1:
Debt maturity structure
Financing Graph1 debt
Graph 2:
Debt outstanding as of 31.12.2023
Financing Graph2 Debt
Graph 3:
Matured bonds in 2023
Financing Graph3 matured 2
Graph 4:
Interest rate hedging in debt facility as of 31.12.2023
Financing Graph4 interest
Graph 5:
Distribution
Financing Graph5
Positioned with a clear strategy the group aims to manage, develop, and acquire public properties with a collective value of up to NOK 15-20 billion in the coming years.

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