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Entra’s Q2 2025 earnings call highlighted a mixed financial performance, with rental income experiencing a decline while net income from property management showed improvement. The company, currently valued at $2.26 billion by market capitalization, remains optimistic about future rental growth, supported by its strategic initiatives and strong market position in Oslo’s office space sector. According to InvestingPro analysis, Entra maintains a FAIR Financial Health score of 2.13, reflecting its stable market position despite challenges.
Key Takeaways
- Rental income decreased by $83 million compared to last year.
- Net income from property management increased by 10% from Q1.
- Entra targets a rental income potential of $188 million from existing vacant space.
- Occupancy rates improved to 94.6%, indicating strong demand.
Company Performance
Entra’s overall performance in Q2 2025 reflected a challenging market environment, with rental income declining to $770 million. Despite this, the company achieved a 10% increase in net income from property management compared to the previous quarter. With an impressive gross profit margin of 91.54% and modest revenue growth of 1.56% over the last twelve months, Entra’s strategic focus on prime locations in Oslo and competitive positioning in smaller office segments have contributed to its resilience. InvestingPro subscribers can access detailed analysis of Entra’s operational efficiency metrics and peer comparison data in the comprehensive Pro Research Report.
Financial Highlights
- Rental income: $770 million (down $83 million from last year)
- Net income from property management: $352 million (up 10% from Q1)
- Profit before tax: $534 million
- EPRA NAV: SEK 1.66 (up SEK 3 in the quarter)
- Cash earnings per share: NOK 7.1
Outlook & Guidance
Looking ahead, Entra anticipates rental growth above inflation, driven by its ongoing development projects and refurbishment efforts. Trading at a P/E ratio of 32.18, the stock currently sits between analyst targets ranging from $9.40 to $14.15. The company expects further interest rate cuts and projects a rental income potential of $188 million from existing vacant space and $55 million from ongoing projects. Entra’s focus on disciplined capital allocation and maintaining rent uplift targets positions it well for future growth. For deeper insights into Entra’s valuation metrics and growth potential, investors can access exclusive analysis and ProTips through InvestingPro.
Executive Commentary
CEO Sonia expressed confidence in Entra’s growth prospects, stating, "We are well set to provide growth going forward." CFO Ola emphasized the company’s strong financial foundation, saying, "We have created a solid financial platform." Sonia also noted the stability of the Norwegian economy, which supports Entra’s outlook.
Risks and Challenges
- Potential increase in Oslo office vacancy rates, expected to rise to 7%.
- Macroeconomic pressures, including changes in interest rates.
- Competition in the office space market, particularly in smaller segments.
- Energy consumption and sustainability targets pose operational challenges.
Q&A
During the earnings call, analysts inquired about Entra’s rent uplift targets and the momentum in letting activities. The company confirmed its commitment to these targets and highlighted positive trends in leasing. Additionally, Entra addressed concerns about contract expiration risks in 2025-2026, assuring limited exposure.
Full transcript - Entra ASA (ENTRA) Q2 2025:
Sonia, CEO/Presenter, Entra: Good morning, and welcome to Entra’s second quarter presentation. Moving right on to the highlights. Rental income of $770,000,000 this quarter, that is $83,000,000 below same quarter last year, mainly due to divestments. Net income from property management of $352,000,000 this quarter compared to $348,000,000 same quarter last year. And net income from property management is then 10% up compared to same quarter sorry, last quarter, first quarter.
Net value changes of $191,000,000 in the quarter and value increases on our investment properties of $289,000,000 leaving us then with a profit before tax of $534,000,000 We were also pleased to see then that our EPRA NAV increased to SEK 1.66, up with SEK 3 in the quarter. And we have had a very strong letting activity with net letting coming out at 22,000,000, increasing also our occupancy rate then to 84 sorry, 94.6% in the quarter. Our climate targets have now also been validated by the science based targets initiative under the building sector framework as the first Norwegian company. So moving on to operations. As I said, we had a very high letting activity in the quarter and gross leasing of $2.00 $3,000,000 in the quarter with also terminations in the quarter of 102,000,000 As I commented on last quarter, we had a large deal affecting the numbers with Jara, where we chose to extend their existing lease in their existing headquarter building at Skagen for a ten year period and at the same time, terminate a lease, which they signed with us one year ago for a larger space in a neighboring building.
This is a good deal for us as we will have lower CapEx in both these buildings. It may, however, affect our vacancy from the second quarter next year onwards. The cash effects of that deal was already reflected in the rental income bridge. And this deal has a negative net letting effect of $24,000,000 which is included then in the quarterly net letting, which came out with a positive of 22,000,000 The high letting activity has also brought our occupancy up with 80 basis points. So as mentioned, we are currently at 94.6%.
And all in all, a very strong quarter for us. Pleased to see that the measures we’ve put in place and also very dedicated and hard work from the entire Entra team is starting to pay off. Now due to previous terminations, which already are reflected in the rental income bridge, we do expect to see more fluctuations in the occupancy rate going forward, depending on also when we choose to start future refurbishment projects. We have great locations. We have very attractive products, which are in demand in the market.
Market trends are increasing, and we expect to see increases going forward. So we are very conscious about chasing the rent uplift potential in our management portfolio at the same time as we work to increase the occupancy ratio. So we are confident that we will be able to let the vacant space, but also, as I’ve said before, realistic that it may take some time as we want to chase the rent uplifts in the markets. At the bottom here, you can see some of the largest contracts signed in the quarter with the Jara International. And in Bergen, TV2 has prolonged for 9,400 square meters and increasing also activity in our project in Bergen, which I will get back to.
This quarter, we started the refurbishment project in Drammeswein 134. This is a building of 121,000 square meters located at Skagen. It’s consisting of office, retail and parking. And we are pleased that we have resigned with 66% of the existing tenants in the building, and we will now start the refurbishment as the technical infrastructure is ready for an upgrade as well as some of the office space. When doing this, we will also increase the energy class from D to C, ensuring that this building will be aligned with the taxonomy requirements and thereby also available for our green pool of financing in the future.
The yield on cost on this building will be around 5.8% for the project as compared to then prime yields at Skagen, currently around 5%. Our ongoing development projects are all progressing according to plan on time and cost. A few comments on the arrows. You can see here in Hothermanswein in Trondheim, we have taken down the cost slightly, seeing that we are now getting closer to or very close to completion. So some of the contingency reserves have been released.
In Bergen, at Nondesertigarten 4, the occupancy rate is up from 55% to 83 in the quarter. We have signed several leases there, some increasing qualities from tenants and also some extra VAT from public tenants, but this increasing the project costs, but this is fully compensated to higher rental income and the yield on cost remains the same. So in total, with including Drammeswein $134,000,000 the remaining CapEx on these projects now is currently at $640,000,000 Now we continue to have a disciplined approach to capital allocation, prioritizing project CapEx in relation to the letting activity in the short term. We are also very well positioned to increase the project activity when we get the rents required to provide attractive returns. As mentioned, we were very pleased to see that the climate targets, as stated in our annual report, now also have been validated by the Science Based Targets Initiative.
This is a global initiative that assists companies in setting credible, comparable and research based targets for greenhouse gas reduction, in line with the Paris Agreement. The framework shows companies how they must reduce their emissions in the short term, meaning five to ten years, and also in the long term towards two thousand and fifty to be climate neutral. To achieve the 2050 targets, the real estate sector, as all other industries, is depending on product innovation, technological development and also an industrialization of climate friendly materials. But in the short term, we can focus on reducing our emissions from energy and also materials. Now since electricity in Norway is primarily from renewable resources and also as a significant portion of our property portfolio is highly energy efficient, we have already low emissions from energy consumption in our portfolio.
Consequently, Entra’s largest emissions stems from the production and the transportation of materials used in our project activity and operations and maintenance for the buildings. So the most important thing for us to do in order to reach our targets is thus to reduce the consumption of materials and transportation going into our portfolio, which also aligns very well with our continuous focus to improve the profitability through reducing costs in project development and operations. A few words on the market situation. First, let me start by saying that the Norwegian economy remains solid and stable despite global market volatility. The direct impacts of American tariffs are minimal for Norway, seeing that we have less than 2% of our GDP as exports to The U.
S. Yet, of course, as a small and open economy, Norway is exposed to any growth dampening indirect effects. Norway is well positioned to both stimulate and support its economy through fiscal policies and public spending with its sovereign wealth fund. And we also have monetary policies, which remain available as an effective tool to stimulate the economy if necessary. The first rate cuts came now in June, where the Central Bank reduced the rate to 4.25%.
And based on current estimates, they have also communicated that they expect up to two more cuts within the year. The CPI came in at 3% for June, which was also in line with Neugesbank’s estimates. And the economy is now expected to pick up as lower interest rates and solid wage growth starts feeding into the economy. The mainland GDP growth is expected to be around 1.5% going forward in Norway. The growth has, in recent years, primarily been driven by public spending in addition to the to a large extent, oil and gas investments, which has benefited the West Coast Of Norway.
And further rate cuts should also now stimulate the more interest sensitive parts of the economy, which also should benefit the Oslo region going forward. Employment growth is expected to remain slightly positive going forward. In Oslo, the employment growth has primarily been within the public sector the last year, which currently now is also transitioning into different or new workplace solutions. And they are, therefore, not contributing to increased net absorption for the moment. The letting activity was slowed down in the second half of twenty twenty four.
The first quarter this year, we saw in the market as a whole more or less normal volumes for the first quarter. The second quarter numbers came out just this week, where we could see that letting activity was in the lower range of what’s normal for a second quarter, also knowing or relative to the volumes expiring for 2025. But at the same time, we have also seen that the lease searches the amount of lease searches coming out into the market have increased through both first and second quarter, which provides support for more activity in the second half as these tenders typically take six to twelve months before to conclude following after they come out. The vacancy is currently around 6.5% in Oslo and is expected to increase to 7% going forward. Both in Oslo and Bergen, we see that there are variations between the different parts of the city with vacancies between 68%.
And also in some parts of the city with older building stock, vacancy higher than 8%. Now most of the vacancy remains in the smaller office segment for below 2,500 square meters. This is also where Entra has the majority of its vacancy. And we are experiencing that the competition is still pretty strong here as this also is where you meet the sublease market. Now there is, as you can see from the bottom right graph, limited limited new supply coming into the market in the short term.
But now with signs of increasing activity for larger office space or searches and also, as I’ll get back to higher market trends in certain areas, more development activity could develop or is likely going forward, which potentially also could expand supply from ’twenty eight and ’twenty nine onwards. Yes, a few words on rental growth also. Now with the continued economic growth as a base case, the letting market fundamentals look very promising for Oslo going forward, and we believe that rents should increase more than inflation in the years to come. As you can see also from our consensus report top right, expectations there are that we will see around 11% rental income growth over the next three years. And fresh data, which came from Idealstat stick this week, also showed that the top segment, meaning the 25% most expensive leases in Oslo Inner city, around the central station, where we also have the majority of our portfolio, had an income growth months of this year compared to the same period last year.
So we are now starting to see that market trends are converging towards the rent levels we need to have to get to breakeven rents for newbuild projects. A few words on the transaction markets. It is the financing markets are available and the lending sentiment has been trending positive with also credit margins tightening, but still somewhat selective lending market in the banks. The transaction market has remained active and is expected to pick up further in the second half with further rate cuts. In the first half, we saw transaction volumes around $35,000,000,000 which was more or less in line with the same period last year.
Prime yields are currently around 4.5 according to our consensus report. And this has also now been verified in transactions both in the first half of this year. But then also, we see that the buyers predominantly are in the prime segment has been equity buyers. So I think that moves us over to Ulle and a few words on the finances.
Ola/Olle, CFO/Financial Officer, Entra: Thank you, Sonia. In Q2, our financial performance improved compared to previous periods. As you’re all aware of, in Q2 twenty twenty four, we divested our Trondheim portfolio. So for comparison purposes, we have marked out the Trondheim impact on rental income in the graph to the left. Rental income came in at $770,000,000, down from $785,000,000 in the same quarter last year, adjusted for the Trondheim divestment.
We had positive impact in the quarter of $17,000,000 from CPI as well as a net positive impact from the projects of $11,000,000 However, this was offset by divestments in addition to the Trondheim portfolio of minus $10,000,000 as well as negative like for like, excluding CPI, of minus 80,000,000 due to increased vacancy. In addition to this, in Q2 last year, we had SEK 15,000,000 positive impact from a buyout of a lease agreement. Adjusted for all divestments and the lease buyout, the underlying growth in the quarter is 1.2% compared to the same quarter last year. Compared to the first quarter, the rental income is slightly down from $774,000,000, and this is in line with the bridge that we presented in the first quarter. Net income from property management was solid at $352,000,000 and slightly up from SEK $348,000,000 in the same quarter last year.
The loss of revenues from several divestments was offset by increased cost savings increased interest cost savings, and I will come back with details on the other items, which we also improved in the quarter on the next slide. Compared to Q1, we had a significant improvement in income from property management from NOK $320,000,000 to NOK $352,000,000. In Q1, we did have a one off of NOK 11,000,000 related to our bank refinancing. However, in addition to this, we have reduced both our interest expenses as well as our cost level in the quarter. Profit before tax came in at $534,000,000, and this includes NOK 191,000,000 in net positive value changes.
Moving to the full P and L. So I already gone through the rental income details, but I will give you more flavor on the other cost items. OpEx came in at $8,000,000 or only 7.5% of our rental income. This is in the lower end of our historical range. The reduction from SEK 68,000,000 in the same quarter last year is mainly due to the divestments we’ve done, but we also have reduced energy consumption in the quarter.
Looking at the other revenue, other costs, this was positively impacted by net gains of NOK 12,000,000 on the forward salt Holtermanslav project in Trondheim, which is set for completion in the second half of this year. Admin costs came in at $51,000,000 compared to the $48,000,000 we had in the same quarter last year. This is in line with expectation, and we have previously highlighted that we target to be around $200,000,000 in admin costs for the full year. Net realized financials came in at SEK $333,000,000, down SEK 68,000,000 compared to the same quarter last year. This is mostly due to a reduced debt level with nearly 7,000,000,000 following the divestments we have done over the last twelve months.
But in addition to this, we also have an average interest rate, which is lower than the same quarter last year, which represent nearly onethree of this improvement. Net value changes from investment properties was positively with $298,000,000, and I will come back with more details on this later on. And then we had negative value changes in our financial instruments of minus 98,000,000, but this is split in two. First, we have negative adjustments in our financial hedge positions of SEK 181,000,000 caused by lower long- and medium term interest rates. But this was partly offset by value increase in interest investment in SVG property of 83,000,000.
And this gave then a profit before tax of NOK $534,000,000. Moving then to our per share data. Cash earnings per share is flat at NOK 7.1 measured over the last twelve months, as you can see in the graph to the left. However, our net asset value had a slight uptick for the fourth quarter in a row and came in at SEK166 per share, up from SEK163 per share in the first quarter. In addition to this, we have distributed NOK37 in dividend since the IPO, which give a total return per year of 9%.
Over then to our rental income development. Looking into Q3, the bridge indicates a rental income of $763,000,000, more or less similar to the bridge that we presented in the first quarter. But if you look into 2026, we can see that the solid net letting we had in the second quarter is impacting the bridge positively with improved rental income trends compared to what we presented in the first quarter bridge. This graph is not a guidance. It just highlights the rental income based on reported events in existing contracts.
There is upside in this bridge, especially in the latter part of the periods, which we are changing. First and foremost, we aim to let out existing vacant space, which have a rental income potential of 188,000,000 per year. In addition to that, we have available vacant space in our ongoing project, which have a rental income potential of $55,000,000 per year. And lastly, we work on re letting space that will feed into vacancy following the terminations we have had in the last quarters. Moving then over to our property value, which increased to 63,800,000,000.0 in the quarter.
Total value changes is NOK $372,000,000. Of these, value changes in our investments properties is up with SEK $289,000,000 or 0.5% compared to the first quarter. And we also have value increase in our investment in SVG property with 83,000,000, which we have marked out in the graph here to the left. The increase in investment properties is mostly related to reduced discount rates from our appraisers as well as higher market rent expectations and only to a minor degree related to net letting. The deviation between the appraisals are relatively limited at 2.6%, and this has also come down slightly over the last few quarters.
CapEx in the quarter was $335,000,000, mostly related to the five ongoing reported projects. We will continue to have a disciplined investment strategy and prioritize CapEx on increasing occupancy on current portfolio and realize then market rent uplift. Portfolio net yield now stands at 4.94% and adjusted for fully net and market rent, it is at 5.72%. Moving then over to our debt metrics, which continued with a slight improvement in this quarter. The ICR has bottomed out and increased from 1.98% to 2.03 in Q2 measured over the last twelve months.
Isolated in Q2, it came in at 2.1. Leverage ratio was unchanged at 49.1% and the same with net debt to EBITDA, also unchanged at 11.7%. We expect a continued gradual improvement in our credit metrics going forward, supported by our running cash flow as well as continued capital discipline. In addition, there is potential for value increases as well as lower interest costs from further rate cuts, which has also feed into improved credit ratios. We have created a solid financial platform in the first half of twenty twenty five, and the average time to maturity for our total debt now stands at three point eight years.
The debt capital market was open during the quarter with tightening credit spreads during the period. We issued SEK 1,000,000,000 in new unsecured bonds with six year tenure at 140 basis points, down to 135 basis points credit spreads. And after the quarter end, we reopened the six year bond and issued another 700,000,000 at 128 basis point credit spread. As you can see in this graph to the right, we have undrawn credit bank lines of 8,200,000,000.0, which is committed until 2028. And with that, we have ample available liquidity for more than next twenty four months.
And we will continue to work to optimize our total funding cost going forward. 62% of our debt financing is green, and we have capacity to issue more green debt, if required, due to our existing environmental friendly asset portfolio. We will continue going forward to have a conservative approach when it comes to both leverage and interest risk. And with the gradual improvement in credit metrics, we believe that we have set the path for a rating upgrade in the future. Moving then to our cost of debt development.
The all in net financial cost is down from 4.44 percent in Q1 to 4.23%, as you can see in this graph, while the interest rate or interest bearing debt was at four point zero in the quarter. The interest rate cut from the Norwegian Central Bank of 25 basis points in June will first impact our Q3 numbers, which is why the forecast is down in Q3, as you can see also in this graph. Over the next eighteen months, we expect a relatively stable interest rate due to the NIBOR forward curve and considering our fixed credit margin as well as our existing interest hedges. And that, Sonia, I leave it over to you.
Sonia, CEO/Presenter, Entra: Thank you, Ola. A few closing remarks. First of all, summarizing the second quarter, it’s been a positive one, strong letting from the Entra team with positive net letting also then increasing our occupancy with 80 basis points. Pleased to see that lower NOK interest rates and also bond credit margins tightening, reducing our all in financial costs. And the growth in net income from property management, as mentioned, has been then 10% since first quarter, and we continue to see increases in our property values this quarter.
We are operating in a very solid and stable Norwegian economy and the lower interest rates and real wage growth, which we have seen now for some years, should start feeding into the economy going forward. And there are expectations of further two up to two rate cuts during this year. And employment growth remains slightly positive going forward, expectations of that. Now we have very promising long term letting market fundamentals and now also seeing increased tenant search activity, which is a positive. And the first signs that market rents also are converging towards breakeven rents for new projects.
So Entra is well set to provide growth going forward, both through CPI, rent uplift potential, letting the vacant space and the project portfolio. I think that sums it up for now. And I don’t know if we have any questions, Isabel?
Isabel, Moderator/Q&A Facilitator, Entra: Thank you, Sonia and Olle. We will then transition to the Q and A session, with the first question being having secured several contracts this quarter, have you had to adjust the price in the negotiations you’ve had?
Sonia, CEO/Presenter, Entra: No, I wouldn’t say that. We are very conscious, as I said, on chasing the rent uplift potential. And on every contract, we set targets and follow-up on our targets. And what I’m seeing so far is that we are delivering well on our rent targets. So very happy to see that we are actually managing to take out the rent uplift, which we’re seeing in the market.
Isabel, Moderator/Q&A Facilitator, Entra: Can you provide some flavor to the net letting going forward?
Sonia, CEO/Presenter, Entra: Yes, I can. We have put in place some extra measures in respect of increased resources, strengthening our team, which also should benefit us more actually going forward and increased focus on marketing. So based on also the pipeline, which I see now, we have quite a lot of activity coming into the second half, which we should benefit from. So positive in respect of gross letting. And then when you look at risk of terminations or contracts at risk, we have limited volumes in 2025 and 2026 or with expiry in 2025 and 2026, as I said last quarter, around 30,000,000 contracts, which are not yet concluded in 2025 and 80,000,000 in 2026.
And that’s quite well diversified on around 20 contracts in both of these years. And then there is always of course a risk that the net letting will be affected by terminations coming further out in the rental income bridge. But then we still have quite some time to work on letting. So positive momentum on letting and then we don’t control the potential terminations.
Isabel, Moderator/Q&A Facilitator, Entra: This will be the last question for today. What is the expected rent uplift for Drammeswein 134 when the refurbishment is completed?
Sonia, CEO/Presenter, Entra: Well, first of all, good thing, I probably didn’t mention that, but we will have cash flow through the entire project phase, which of course is an extra plus for that project. And I believe that we, on that project, are targeting an uplift should be around 6% in that project.
Isabel, Moderator/Q&A Facilitator, Entra: Thank you, Sonia. And with that, we’ll conclude the Q and A session.
Sonia, CEO/Presenter, Entra: Thank you very much for joining us today, and we see you again next quarter.
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