Untitled

Årsrapport 2019 - Norwegian Property ASA

Content Side 1

Annual report

Pier X - Aker Brygge, Oslo

2021

NORWEGIAN PROPERTY ASA

Annual report 2021 - Norwegian Property ASA

Content Page 2

Content

Business concept, vision and values

Page 3

The property portfolio

Page 4

CEO summary

Page 5

Directors’ report

Page 8

Annual group accounts

Page 17

Annual accounts of the parent company

Page 51

Declaration by the board of directors and the CEO

Page 65

Independent auditor’s report

Page 66

Key figures

Page 72

EPRA Performance Measures

Page 75

Corporate governance

Page 79

Sustainability report

Page 88

Risk and risk management

Page 104

Presentation of the directors

Page 119

Definitions

Page 121

Sources and references to Scenario analysis

Page 123

Contact

Page 125

Annual report 2021 - Norwegian Property ASA

Business concept, vision and values Page 3

Business concept, vision and values

BUSINESS CONCEPT

Norwegian Property will create sustainable growth in value through

managing, developing and investing in property located in central growth

areas where we have a comparative advantage. The tenant portfolio will

have a good mix, contributing to the creation of meeting places and

relationships which encourage engagement.

VISION

We will create meeting places and relationships which encourage

engagement

VALUES

Annual report 2021 - Norwegian Property ASA

The property portfolio Page 4

The property portfolio

Norwegian Property is a property group with its head office in Oslo.

We are a focused and fully integrated real estate specialist, with holdings located primarily in the Oslo area,

and we own, develop and manage our properties. We concentrate on developing attractive environments

with a mix of offices, retail outlets, services and culture.

Our philosophy and base values are founded on a passion for the property business. To us, this is about

creating meeting places which encourage engagement and provide fertile soil for growth and relationships

between people and their surroundings.

We have identified four drivers for long-term value creation: marketing and letting, property development,

operation and management, and transactions and finance.

Our property portfolio breaks down into three areas: Oslo’s central business district (CBD), the Nydalen

district and Fornebu. In addition, the property portfolio includes one retail property at Hasle (Other).

The group also has a major investment related to a 42.5 per cent share in the residential development company Nordr,

with a land bank of approx. 13,378 units and 1,927 units under development on a 100 per cent basis. In Stavanger, the

group has a joint venture with Base Bolig for a development project of 250 residential units and approx. 3,000 gross

lettable area (GLA) on a 100 per cent basis

Annual report 2021 - Norwegian Property ASA

CEO summary Page 5

CEO summary

The year 2021 was the second year marked by the

COVID-19 pandemic. Therefore, I will start by

repeating my appeal from last year. Everyone

should try to go out and eat an extra lunch or

dinner, buy some flowers or other gifts for friends

and family and use different wellness offers

around the city. These services and shops help to

enrich our everyday lives and create pleasant

meeting places for both employees and visitors. If

there is one thing the pandemic has shown us, it is

that humans need to be social to further develop

ourselves, give us new impulses and to foster

creativity and a corporate culture. Therefore,

NPRO’s vision is also firm; we want to create

meeting places that engage and contribute to

good relations between those who use these

areas.

Our core values are the basis for all of our work.

We must be brave, interactive, show initiative and

listen to tenants, visitors, employees, authorities

and other stakeholders. The annual report for

2021 shows signs of the opportunities we took

advantage of during 2020. Our real estate

portfolio has grown to NOK 25.1 billion at the end

of 2021, up from NOK 23.4 billion as of Q4 2020.

The increase in value of NOK 1.7 billion is partly

due to the total investments during 2021 of NOK

314 million, and partly an increase in net rents of

NOK 89 million. The results show the high activity

we have managed to maintain throughout the

year, despite the pandemic and restrictions. The

results also show that the organisation has

managed to maintain a results-based focus

despite various government-imposed restrictions

throughout the year.

Our rental income increased by 33 per cent

compared to 2020, and for the first time in many

years, NPRO again has a run rate of more than

NOK 1 billion at the end of 2021. In addition, our

profit before tax and value adjustments has

increased by 37 per cent compared to 2020,

which shows that the company’s focus on cost

control and operations over time provides

returns. In addition to these results, we also

receive a return on our investment in Nordr of

42.5 per cent. The return will only be reflected in

our figures when the apartments are handed over

to the customer that has purchased the

apartment. The activity since the takeover in

September 2020 will, therefore, first be reflected

during the second half of 2022. At the end of

2021, Nordr had a total of 1,927 units under

construction and the sales price for these

corresponded to NOK 11.6 billion. 88 per cent of

the properties under construction were already

sold.

During the year, our largest owner bought the

remaining shares in NPRO, and we are no longer

listed on the Oslo Stock Exchange. On the other

hand, we still have listed bonds, and as mentioned

earlier, we want to continue to expand our

sources of financing. Our total bond portfolio was

approximately NOK 11.5 billion at the end of the

year. In order to remain relevant and attractive to

debt investors, we will continue to report

quarterly results, despite the fact that our equity

has been delisted.

Annual report 2021 - Norwegian Property ASA

CEO summary Page 6

During 2021, we carried out several refinancing

activities. Our ambition to expand our financing

sources was followed up with our first Green Bond

in May 2021. The loan was NOK 650 million and

with a mortgage on our Breeam-in-Use certified

building at Snarøyveien 36. During 2021, we have

environmentally certified 70 per cent of our office

portfolio. Our goal is to have our entire office

portfolio certified by the end of 2024. In parallel

with the certification, we will also carry out

upgrades and improvements on our portfolio.

Despite restrictions and limitations, it is gratifying

to see an ever-stronger focus from our employees

on ESG projects. Aker Brygge has opened

Norway’s first electric boat harbour. Here, electric

boat owners can charge their boats’ batteries

during their use of other services at our ground

floor in Aker Brygge. At the same time, Kruser AS

organises the rental of electric boats to visitors

who want a few hours or a day out at sea from

the same pier.

Throughout the year, we have tried to strengthen

our focus on bio-diversity in the city. We have

established a new environmentally friendly kiosk

in the front at Aker Brygge covered with plants

which are able to withstand the Nordic climate.

After a couple of challenges in the first months,

the kiosk has established itself as an eye-catcher

for the public when they enter Aker Brygge. Our

bees, which are deployed in the garden at

Snarøyveien 30, have also had a good production

year and our tenants in the building can daily

enjoy the honey produced right outside their

office window for lunch.

We continue to report on our climate emissions in

accordance with the TCFD standard. This year, we

are also expanding the reporting with a scenario

analysis. It feels good to see that the climate

challenge is no longer perceived as an extra

burden. It has become part of all our DNA, and

hence has become a part of our daily work.

Every year, we support various initiatives in our

local area. For the second year in a row, we have

contributed to the Zuccarello Foundation in 2021.

The foundation distributes funds to children in

Norway so they can afford to participate in

different sports activities. The founder, Mats

Zuccarello, is strongly involved in the foundation’s

work, and spends much of his free time working

for the foundation. We also spend time offering

various events to the surrounding areas where we

own properties. We organise free outdoor

cinemas and a Christmas concert with

“Sølvguttene”. We also sponsor Fjord Oslo Light

Festival and participate in Oslo Art Walk. During

2021, we have also had an art project at Vinslottet

in Hasle, where 7 different young and ambitious

artists have been given areas available to present

their projects in a separate art exhibition.

We want to be a company that also offers

opportunities for the younger generation. During

2021, we have had a total of 15 young people in

summer and holiday jobs at the marina at Aker

Brygge. A total of 3 students have been deployed

for 1-3 days and participated in job shadowing to

learn what life in a normal job can look like. Their

commitment and interest are impeccable and

educational not only for the students, but also for

us as employees.

Two years ago, we moved away from annual

employee surveys and replaced it with a program

that measures the climate in our company on a

weekly basis. Despite years of a pandemic and

restrictions, the results show that we have highly

motivated employees who are proud to work at

Norwegian Property. Now that most restrictions

have been removed and everyone is back at the

office, we will actively continue to work with the

climate measurements and continuously raise

issues that we can find in the surveys. I think this

will be a good tool for us in the future.

Annual report 2021 - Norwegian Property ASA

CEO summary Page 7

Through the acquisition of Snarøyveien 30 at the

end of 2020, we are now established in 3 main

areas in the Oslo region. We are always looking

for new opportunities. With the support of a

strong balance sheet and a supportive owner, we

are ready to approach new opportunities in the

market. During the first quarter of 2022, the

pandemic restrictions have been removed and

employees are flowing back to the office. Some

tourists have also started to return and visit our

areas. Despite acts of war in Europe, optimism

prevails in our submarkets. We will spend much of

2022 on further developing our existing

properties. The vacancy in our portfolio is low, but

we are working specifically with some large

tenants in all the significant vacant areas.

We are looking forward to 2022 and a new

adventure!

Annual report 2021 - Norwegian Property ASA

Directors’ report Page 8

Directors’ report

About Norwegian Property

The commercial real estate company Norwegian

Property owned 29 commercial properties in

Norway as at 31 December 2021. All of them are

located in the Oslo region.

The market value of the group’s property portfolio

was NOK 25.1 billion as at 31 December. These

properties primarily comprise office premises with

associated warehousing and car parks as well as

retail and restaurant space. The group also has a

major investment in the residential development

company Nordr. Nordr’s business consists of both

wholly owned and partly owned plots and

projects. Norwegian Property also has a joint

venture with Base Bolig which is related to a

development project in Stavanger.

The business is organised in the parent company

Norwegian Property ASA with subsidiaries. With

its head office at Aker Brygge in Oslo, the group

had 57 employees as at 31 December 2021.

N

orwegian Property’s business purpose article

states: “The Company operates in management,

acquisitions, sales and development of real estate

and infrastructure, including participation in other

companies and through trading and investment in

interest/units and securities, as well as businesses

which are related to such.”

The business in 2021

Market and letting

LETTING MARKET

Norwegian Property estimates the office vacancy

in Oslo at 6.1 per cent overall and 4.2 per cent in

the city centre. Moderate vacancy rates in the

past few years have contributed to positive trends

for rents. Office vacancy at Fornebu is 7.4 per

cent.

The rental market for Oslo was strong prior to the

COVID-19 pandemic, driven by higher economic

growth, increased employment, and limited new

building activity. COVID-19 led to extensive layoffs

for certain employment sectors. Office-intensive

Highlights in 2021

Norwegian Property continues to deliver

strong financial results

• Following expansion of the property

portfolio rental income increased by 33 per

cent.

• Total annual rental income (run rate) from

the company’s property portfolio increased

during the year as a result of the new and

improved leases, and it has exceeded NOK 1

billion by the end of the year.

• Profit before income tax and value

adjustments improved by 37 per cent.

• The positive fair-value adjustment of

investment properties for Norwegian

Property was 5.7 per cent, which is related

to compressed yields, improved market

rents and new and improved leases.

• Due to a major increase in the order backlog

for the housing business, Nordr is expected

to realise the large income potential in the

land bank for the coming years.

• A number of financing activities have been

carried out in 2021. Average interest rates

and margins decreased during the year.

Norwegian Property will continue its efforts to

expand and develop the business

• The property portfolio has been significantly

expanded through acquisitions in recent

years. Norwegian Property will continue its

efforts to expand and develop its business

through additional acquisitions and by

pursuing long-term development

opportunities in the existing portfolio.

• Norwegian Property has achieved

environmental certifications for 70 per cent

of the office portfolio, with a plan for the

approval of the remaining properties.

Annual report 2021 - Norwegian Property ASA

Directors’ report Page 9

businesses were not hit as hard as the hotel and

retail industry.

The economic activity is expected to pick up post

COVID-19 during 2022. The volume for new

buildings for the coming year is relatively limited,

particularly in the Oslo CBD. Vacancy in Oslo is still

expected to be low and rent levels in all core

areas for Norwegian Property are increasing.

Turnover based rent related to the company’s

retail and restaurant tenants at Aker Brygge was

increasing pre-COVID-19, driven first and

foremost by restaurant revenues. The positive

development for these segments is expected to

continue as society returns to normal in 2022.

LETTING ACTIVITY

Total annual rental income (run rate) from the

company’s property portfolio increased during the

year as a result of a large number of new and

improved leases, and it has exceeded NOK 1

billion by the end of the year (increase from NOK

0.983 billion to NOK 1.039 billion in 2021).

New leases with a total annual rental income of

NOK 77.9 million (NOK 54.4 million) were signed

in 2021, while the existing leases totalling NOK

49.3 million (NOK 50.6 million) were extended.

Expired leases totalled 38.2 million (NOK 90.3

million). Therefore, the net increase for the year

in annual rents from leases was NOK 89 million

(NOK 14.7 million).

Overall financial vacancy in the property portfolio

totalled 5.5 per cent as at 31 December 2021 (7.2

per cent), which was largely related to

Snarøyveien 36 at Fornebu. The weighted average

remaining duration of the leases was 5.1 years

(5.9 years).

Financing

FINANCING MARKET

Loan margins in the bond market are still at low

levels at the end of 2021, but they have increased

towards the end of the year.

Market interest rates are still at historically low

levels, but they are rising towards the end of

2021. Inflation rates are rising in both the United

States and Europe. Energy costs are very high, and

together with a shortage of goods and materials

as a result of the COVID-19 pandemic, this has led

to increased inflation. Higher inflation has

increased the probability of a further increase in

interest rates.

FINANCING ACTIVITIES

The group’s net LTV ratio related to the fair value

of investment properties and investments in joint

ventures is 42.2 per cent (44.6 per cent), with

bonds listed on Oslo Børs accounting for 96 per

cent (84 per cent) of its borrowings for these

assets as at 31 December 2021. This is in addition

to bank facilities.

A number of financing activities have been carried

out in 2021. Two new bond loans have been

established, several extensions of existing bond

loans have been made and several bonds have

been repurchased. Average interest rates were

reduced from 2.94 per cent to 2.81 per cent and

average margins from 1.39 per cent to 1.33 per

cent during the year.

Interest-bearing bank and bond debt in the

balance sheet totalled NOK 12,004.8 million as at

31 December 2021 (NOK 12,097.1 million), with

non-current interest-bearing debt accounting for

NOK 9,583 million and current interest-bearing

debt for NOK 2,421.7 million. Current interest-

bearing debt as at 31 December 2021 relates to

facilities up for refinancing during 2022.

Property transactions

TRANSACTION MARKET

The level of activity in the transaction market has

been high over several years, with many property

deals in various segments at sharp yield levels.

Long-term interest rates remain historically low,

but they have increased towards the end of the

year. Many buyer groups are active and hunting

for good objects. The independent appraisers

assess that the prime yield for the Oslo CBD is

approx. 3.3 per cent.

Annual report 2021 - Norwegian Property ASA

Directors’ report Page 10

TRANSACTIONS CONDUCTED

Norwegian Property has a strategy to strengthen

the portfolio of properties in its main priority

areas in the Oslo region, both by the acquisition of

additional properties and by further developing

the existing property portfolio.

Norwegian Property bought the Felix property at

Aker Brygge in Oslo in 2021. The 5,400 sq.m.

property is located on the lower floors of the

Fondbygget building. After the purchase,

Norwegian Property owns all the business units in

the building. The agreed gross value for the

property was NOK 172 million.

Through several acquisitions in recent years,

Norwegian Property has gained control of a 4,800

sq.m. plot of land at Gjerdrums vei 1-5 in Nydalen.

In 2021, Gjerdrums vei 1 was purchased for NOK

18 million. An architectural competition has been

held for the development of the area, and

Norwegian Property plans to build a new office

building on the property with a total space of

approx. 15,000 sq.m. The process of a new zoning

has been initiated.

Effects of COVID-19 on the business

Norwegian Property has focused on the health

and safety of employees, tenants, visitors and

suppliers during the pandemic period. The

company has followed the governments

recommendations to help prevent the spread of

the virus. Norwegian Property has been fully

operational, with office employees working from

home when required. Operating personnel have

handled the day-to-day operation of the

properties as far as possible on the basis of

ordinary routines. Norwegian Property has had no

major ongoing projects adversely affected by the

pandemic.

The COVID-19 pandemic has particularly affected

retailers, restaurants and service providers.

Government compensation schemes has secured

the basis for continued operation at many

companies. Similar to last year, Norwegian

Property does not expect to receive any

significant turnover based rent beyond the

minimum rents from such tenants in 2021. Loss of

such rental income constitutes an annual income

reduction of NOK 10-15 million. In close dialogue

with tenants, some payment deferrals have been

granted during the pandemic. At the end of 2021,

however, there was no significant need for such

measures. There have been no significant realised

losses on claims related to the effects of the

pandemic. No significant rent discounts or other

concessions have been granted.

Investment in Nordr

Norwegian Property owns Nordr as a joint venture

together with Fredensborg and Union Real Estate

Fund III. At the end of 2021, Nordr had 1,927 flats

under construction and a land bank of about

13,400 units in Norway and Sweden. The land

bank is mainly located in the largest Norwegian

and Swedish cities, with an emphasis on eastern

Norway and the extended Stockholm capital

region in Sweden. Nordr’s business consists of

both wholly owned and partly owned plots and

projects.

The housing business Nordr experienced an

increase in the order backlog in 2021 and at the

start of 2022. This is expected to realise the large

income potential in the land bank for the coming

years. Norwegian Property’s share of the net

profit relating to Nordr was NOK 75.5 million for

2021.

During 2021, sales agreements were entered into

regarding 986 residential units. The construction

started on 915 units, and a total of 572 units were

delivered. A total of 950 residential units are

expected to be completed during the next year.

Norwegian Property’s share of net assets in the

balance sheet as at 31 December 2021 was NOK

1,084.8 million. Independent appraisers have

valued all the plots in the portfolio of Nordr, and

there has been a substantial increase in the values

compared to the values at the time of the

acquisition in the third quarter of 2020. The NOK

1,258 million value uplift increases the EPRA NAV

metrics for Norwegian Property, but does not

affect the book value of the investment.

Annual report 2021 - Norwegian Property ASA

Directors’ report Page 11

Strategic goals

Competitive return with balanced risk

Norwegian Property has a goal of paying 30-50

per cent of its ordinary profit after tax, but before

fair-value adjustments, as a dividend to its

shareholders. Before a dividend is determined, an

assessment will be made of the group’s financial

position and prospects, including the possible

increased capital requirements when investing in

properties and changes to the income base when

properties are sold.

High tenant satisfaction

Norwegian Property’s vision is to create meeting

places which encourage engagement and provide

favourable conditions for developing

interpersonal relationships. The group works to

ensure a high level of tenant satisfaction, which

contributes in turn to a good reputation and

which is important for retaining existing tenants

and attracting new ones.

Environmental improvements in line with the

best in the industry

Corporate environmental and social responsibility

is broadly defined and includes clearly defined

targets for measures to protect the environment

as well as high aesthetic standards for buildings

and outside areas in the local environment. The

group’s strategy and goals are outlined in the

report on corporate social responsibility.

Investment strategy

Norwegian Property has an investment strategy

with the emphasis out on the following main

parameters:

- leading player for office and associated

commercial property in selected areas of

the Oslo region

- prioritise properties close to public

transport hubs, and seek to create

natural property clusters in the group’s

priority areas

- seek to have 5 to 15 per cent of the

portfolio’s area under development over

time

- active management of the portfolio

through transactions, including the

purchase of properties with value

development potential.

Financing strategy

Norwegian Property’s ambition is to deliver a

competitive return over time with a balanced

financial risk profile. The main parameters of its

financial strategy are:

- a goal that the LTV ratio will be a

maximum of 45-55 per cent of the total

value of the group’s investment

properties over time

- to base borrowing on long-term

relationships with banks and other

players pursuing a long-term strategy in

the Norwegian property market

- to seek to diversify funding sources and

the maturity structure to reduce

refinancing risk

- an ambition to achieve a stable

development in cash flow which requires

a relatively high level of interest-rate

hedging, where such hedging will be a

minimum of 50 per cent of the group’s

interest-bearing debt, with the term of

the hedging weighted against the term of

the leases while also being spread over

the period to avoid excessive exposure at

specific points in time.

Risk and risk management

Through its activities, Norwegian Property

manages major financial assets which are exposed

to substantial risk factors, such as development

projects, interest rates and the letting market. The

management model is based on an appropriate

delegation of responsibility for profits, clearly

defined operational parameters and internal

control.

Overall targets are established and further refined

through the continuous updating of the group’s

strategy. On the basis of this strategy, the values

and the ethical guidelines, an overall management

instruction has been established with the

Annual report 2021 - Norwegian Property ASA

Directors’ report Page 12

specification of authorities for delegating

responsibility to defined roles in the organisation.

Guidelines have, furthermore been established for

managing and handling risk in the most important

risk areas, such as operations and finance. Based

on these overall guidelines, governing processes

and routines have been established for the day-

to-day management of the group. The board

regularly reviews the group’s formal documents.

The administration prepares periodic reports

which are reviewed at board meetings. These

reports are based on management reviews of the

various parts of the business, and they contain an

update of the status in relation to targets,

important operational conditions, financial

conditions and a description of the status of risk

areas. Quarterly financial reports are also

prepared and then reviewed by the audit

committee ahead of the board meeting. In

connection with the presentation of the interim

and annual financial statements, the executive

management prepares estimates and makes

assumptions about the future. The accounting

estimates are subject to uncertainty. Estimates

and assumptions with the greatest potential

effect to book values in future periods are related

to investment property.

In connection with its annual consideration of

Norwegian Property’s strategy, the board reviews

the most important risk factors.

Financial risks

The group’s financial risks primarily relate to

changes in equity as a result of adjustments to the

value of the property portfolio, the effect of

interest-rate changes on profits and liquidity,

liquidity risk and profit effects when refinancing

debt and implementing major projects.

Efforts are made to manage the effect of interest-

rate changes on profits and liquidity through

hedging. As at 31 December 2021, 71.2 per cent

(75.6 per cent) of the group’s interest-bearing

debt was covered by interest-rate hedges with an

average term of 6.3 years (6.7 years). Fluctuations

in short- and long-term market interest rates will,

therefore, have a limited impact on the group’s

interest expenses before changes in the value of

derivatives. All the group’s interest-rate swaps are

used as economic hedges. Hedge accounting is

not applied.

The group’s credit facilities incorporate financial

covenants related to the interest cover ratio and

the LTV ratio. Norwegian Property was in

compliance with these and other conditions in the

credit agreements related to its liabilities as at 31

December 2021.

Market risk

Norwegian Property is exposed to changes in

market rents, vacancy in the portfolio, turnover-

based rents and the rate of inflation. The group

has a significant proportion of long-term leases.

The commercial property leases provide fixed

revenues over their term. The majority of the

leases are fully adjusted for changes in the

consumer price index (CPI).

Increases in market interest rates can lead to

increased yield levels for the group's properties,

which in turn can affect the valuations of the

properties.

Project risk

Generally speaking, major construction projects

may involve risk relating to such aspects as the

future letting ratio and level of rents for

converted areas, cost overruns on procurement

and planning, delays, delivery shortfalls and

market developments.

Credit risk

Norwegian Property’s portfolio of office

properties is characterised by high quality, central

locations and a financially sound and diversified

set of tenants. Bad debts have been limited in

recent years. Tenants of the group’s office

properties normally pay rent quarterly in advance.

In addition, most leases require security for rent

payments in the form of either a deposit account

containing a sum equivalent to three to six

months of rent, or a bank guarantee. The group

checks the credit rating and history of new

tenants. As a result, the risk of direct losses from

Annual report 2021 - Norwegian Property ASA

Directors’ report Page 13

defaults or payment problems is limited and

primarily relates to the re-letting of premises.

Liquidity risk

The group’s goal is to have sufficient

liquidity/drawing rights to meet its obligations,

including existing development projects. It also

seeks to maintain a sensible level of liquidity to

meet unexpected commitments. The financing

strategy aims to maintain flexibility in the market

and to cope with fluctuations in rental income.

Liquidity should be secured by unused revolving

credits and overdraft facilities rather than bank

deposits.

Norwegian Property has a high level of hedging

against fluctuations in market interest rates,

which reduces the need for liquidity to meet

unexpected commitments in these areas. Other

liquidity risk relates first and foremost to servicing

instalments on and redemption of loans. The

group generates a positive cash flow from

operations.

As at 31 December, the group had an interest-

bearing debt of NOK 12,004.8 million (NOK

12,097.1 million). The remaining term of the debt

was 4.4 years (4.7 years). Debt maturing and

instalments due during 2022 are recognised as

current liabilities in the consolidated balance

sheet as at 31 December 2021. At the same date,

the group had a liquidity reserve including

undrawn borrowing facilities of NOK 2,110.3

million (NOK 1,573.3 million).

The group seeks at all times to maintain a liquidity

buffer tailored to the redemption profile of its

debt and the ongoing short-term fluctuations in

its requirements for working capital as well as the

requirements which follow from current and

planned projects being pursued by the group at

any given time.

Sustainability risk

The group has worked to uncover risks within the

social, environmental and governance areas of

sustainability. These are described in more detail

in the corporate governance report and the

sustainability report.

Directors and officers liability insurance

The group has taken out insurance with an

insurance company for the directors and officers

of all group companies for their possible liability

to the company and third parties. The sum

insured amounts to NOK 100 million per claim and

in total during the year.

Group accounts

The consolidated financial statements have been

prepared in accordance with the International

Financial Reporting Standards (IFRS), and

consistent accounting principles are applied to all

the periods presented.

Going concern assumption

Pursuant to the requirements of the Norwegian

Accounting Act, the board confirms that the going

concern assumption is realistic. The financial

statements for 2021 have been prepared on that

basis.

Income statement

Revenues

Norwegian Property’s attention on strengthening

the portfolio of properties has contributed to a

rental income growth of 33 per cent for the year.

Following the acquisition of Snarøyveien 30 in

December 2020, the overall rental income for

2021 showed significant growth compared with

last year. Total rental income amounted to NOK

919.6 million for 2021, which is up from NOK

708.6 million in 2020.

Rental income from commercial property in 2021

showed a like-for-like reduction of NOK 21.6

million. The revenue reduction mainly related to

the expiry of a large lease agreement at

Sandakerveien 140.

Total operating revenue in 2021 totalled NOK

919.6 million (NOK 1,564.5 million). Operating

revenue for Norwegian Property in 2021 derived

from leasing of commercial property. In 2020,

revenues derived both from the leasing of

commercial property (NOK 708.6 million) and the

sale of residential units at Hasle (NOK 855.9

million).

Annual report 2021 - Norwegian Property ASA

Directors’ report Page 14

Operating expenses

Property-related operational expenses totalled

NOK 64.3 million (NOK 51.6 million). Other

property-related expenses came to NOK 60.1

million (NOK 55.1 million). Administrative owner

expenses were NOK 59.2 million (NOK 46.8

million).

No costs related to research and development

activities were recognised in the financial

statements for either 2021 or 2020.

Share of profit in joint ventures

The share of profit from joint ventures was

positive at NOK 74.9 million (negative at NOK 0.4

million), mainly related to Norwegian Property’s

share of the net profit for Nordr.

Operating profit before fair-value adjustments

was NOK 810.8 million (NOK 610.2 million).

Net realised financial items

Financial income, which consists largely of interest

income, totalled NOK 15 million (NOK 4.2 million).

Financial expenses, primarily interest expenses

and other costs related to the group’s financing,

were NOK 346 million (NOK 264.8 million).

Profit before income tax and value adjustments

Profit before tax and fair-value changes showed

an improvement of 37 per cent in 2021, and it

came to NOK 479.7 million compared with NOK

349.7 million for 2020.

Fair-value changes of investment property and

interest-rate derivatives

Fair-value changes to the group’s property

portfolio of 5.7 per cent totalled NOK 1,365

million in 2021 (NOK 1,827.5 million), related to

compressed yields and improved market rents as

well as new and improved leases. The transaction

market in Norway is very active and competitive,

with record high transaction volumes. Norwegian

Property is experiencing increasing rent levels in

all core areas.

Long-term market interest rates increased in

2021, and the fair-value adjustment for interest-

rate derivatives showed a positive change of NOK

150.2 million (negative of NOK 101.6 million).

Net profit

Profit before tax was NOK 1,994.9 million (NOK

2,075.5 million). NOK 421.8 million in tax expense

(NOK 399.7 million) is recognised in the 2021

accounts. As a result, net profit for the year was

NOK 1,573.1 million (NOK 1,675.9 million).

Cash flow

Net cash flow from operating activities was NOK

447.1 million (NOK 1,007.8 million). Operating

profit before tax and fair-value adjustments came

to NOK 479.7 million in 2021. The difference

compared with net cash flow from operating

activities relates to the profit from joint ventures

and to changes to working capital items.

Net cash flow from investing activities was

negative at NOK 409.7 million (NOK 6,217.5

million). Capital spending totalling NOK 385.9

million in 2021 related to the acquisition of

properties, tenant adaptations related to new and

renegotiated leases as well as ongoing operational

investment. Investments in the joint venture

Nordr amounted to NOK 23.8 million in 2021.

Net cash flow from financing activities in 2021 was

negative at NOK 389.7 million (negative at NOK

5,593.7 million). The net reduction of interest-

bearing debt came to NOK 115.5 million. Dividend

payments totalled NOK 273.5 million.

The net reduction in cash and cash equivalents

was NOK 352.3 million (increase of NOK 384

million).

Balance sheet and liquidity

The carrying amount of the group’s total assets in

the balance sheet was NOK 26,780.7 million (NOK

25,388.6 million), with investment property

accounting for NOK 24,801.3 million (NOK

23,087.6 million) and properties used by the

owner for NOK 106.7 million (NOK 97.6 million).

Non-current receivables amounted to NOK 234.9

million (NOK 264.8 million), related to the rental

guarantee provided by the seller of the property

Annual report 2021 - Norwegian Property ASA

Directors’ report Page 15

at Snarøyveien 30. Investment in joint ventures

was NOK 1,084.8 million (NOK 1,013.6 million).

The group held NOK 313.5 million (NOK 665.8

million) in cash and cash equivalents. In addition,

the group had unused drawing rights of NOK

1,800 million (NOK 950 million).

Total interest-bearing liabilities in the balance

sheet came to NOK 12,004.8 million (NOK

12,097.1 million), with non-current interest-

bearing liabilities totalling NOK 9,583 million (NOK

10,700.6 million) and current interest-bearing

liabilities amounting to NOK 2,421.7 million (NOK

1,396.4 million). Current interest-bearing debt as

at 31 December 2021 related to facilities maturing

in 2022.

The average interest rate for the group’s loans

(including payments for interest-rate derivatives)

amounted to 2.81 per cent as at 31 December

2021 (2.94 per cent), while the interest-rate

margin averaged 1.33 per cent (1.39 per cent).

The remaining term to maturity for interest-

bearing debt was 4.4 years (4.7 years). Financial

derivatives related to interest hedging accounted

for a net liability item of NOK 26.9 million (NOK

177.1 million). The remaining term to maturity for

the derivatives was 6.3 years (6.7 years).

Equity as at 31 December totalled NOK 12,836.6

million (NOK 11,560.9 million), representing an

equity ratio of 47.9 per cent (45.5 per cent).

Carried equity per share was NOK 19.95 (NOK

17.96).

Valuation of the properties

The group’s valuation process is based on

quarterly external valuations, supplemented by

internal analyses where the group makes an

assessment and determines whether the external

valuations provide an accurate picture of the fair

value of the investment properties. Based on this

process, all the properties were valued on 31

December 2021 by two independent professional

specialists. Cushman & Wakefield and Akershus

Eiendom have each prepared a valuation of all the

properties. An average of these valuations is used

as the basis for recognising the investment

properties at fair value as at 31 December 2021.

The valuation models used for these assessments

are based on discounting cash flows related to

existing leases and the value of market rents after

the expiry of existing leases. Individual

assessments of current expenses, upgrading costs

and the risk of vacancy are made on a property-

by-property basis.

The executive management and the board have

made independent assessments of parameters

which affect the value of the group’s properties,

including developments in interest rates, market

rents, occupancy, the yield level on property

transactions and the quality of the properties. The

conclusion is that the external valuations can be

used as a basis for assessing the fair value of the

properties. Total market value of the group’s

property portfolio was NOK 25,143 million as at

31 December 2021 (NOK 23,450 million).

Norwegian Property has achieved environmental

certifications for 70 per cent of the office

portfolio, with a plan for the approval of the

remaining properties.

Events after the balance sheet date

In accordance with the mandate from the AGM in

2021, the board resolved on 3 February 2022 that

a dividend of NOK 0.425 per share will be paid on

the basis of the accounts as at 31 December 2021.

No other significant incidents since 31 December

2021 provide information concerning the

conditions which existed at the balance sheet

date.

Parent company accounts and coverage of

net loss

The parent company, Norwegian Property ASA,

made a net loss of NOK 52.9 million in 2021 (NOK

300.8 million).

The board proposes that the net loss of NOK 52.9

million and the provision of NOK 273.5 million for

dividend be transferred from other equity and the

share premium as presented in the annual

accounts.

Annual report 2021 - Norwegian Property ASA

Directors’ report Page 16

Corporate social responsibility and corporate

governance

The group has prepared a separate presentation

on CSR pursuant to section 3-3c of the Norwegian

Accounting Act, which covers the natural

environment, employee rights and social

conditions as well as human rights. This report

includes information on the requirements

mentioned in section 3-3a, paragraphs 9-12 of the

Accounting Act related to the working

environment, equal opportunities, anti-

discrimination and the group’s impact on the

natural environment. The presentation appears

on page 88 of this annual report, and it also

includes reporting duties pursuant to Norway’s

Gender Equality and Discrimination Act.

A separate presentation on corporate governance

has also been prepared to cover the group’s

principles and practice in this area, pursuant to

section 3-3b of the Accounting Act. The

presentation appears on page 79 of this annual

report.

Board of directors

The annual general meeting for 2021 was held on

16 April. The AGM re-elected Merete Haugli as

chair of the board and Bjørn Henningsen as

deputy chair. Kathrine Astrup Fredriksen, Cecilie

Astrup Fredriksen, Anders Buchardt, Lars Erich

Nilsen and Carl Erik Krefting were re-elected as

directors. All were elected until the next AGM in

2022.

Shareholders

In July 2021, Geveran Trading Co. Ltd. (Geveran)

acquired shares equalling more than 90 per cent

of the shares in Norwegian Property ASA. In

August 2021, Geveran carried out a compulsory

acquisition of all the remaining shares and the

shares in Norwegian Property ASA were delisted

from the Oslo Stock Exchange.

The company is still listed on the Oslo Stock

Exchange for the portfolio of bonds totalling NOK

11.5 billion.

Outlook

Norwegian Property manages modern and flexible

properties located in attractive clusters near

public transport hubs. The company has delivered

strong and stable results from its operations and

from fair value changes for its properties over a

long period.

The company has three clusters for commercial

properties, which are Oslo CBD, Nydalen and

Fornebu, in addition to the investment in the

residential developer Nordr.

Norwegian Property has a strategy for growth in

its core commercial property business as well as

an ambition to consider opportunities in other

property segments. Norwegian Property will

continue its efforts to expand and develop its

business through additional acquisitions and by

pursuing several interesting long-term

development opportunities in the existing

property portfolio.

Oslo, 24 March 2022

Norwegian Property ASA

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 17

Annual group accounts

Consolidated income statement 1 Jan-31 Dec

Notes 1 to 28 are an integral part of the consolidated financial statements.

Consolidated statement of comprehensive income 1 Jan-31 Dec

Notes 1 to 28 are an integral part of the consolidated financial statements.

(Amounts in NOK million) Note 2021 2020

Rental income for commercial property 17, 18 919.6 708.6

Income from the sale of residential properties 12, 17 - 855.9

Revenues 919.6 1,564.5

Property-related operational expenses 20 (64.3) (51.6)

Other property-related expenses 20 (60.1) (55.1)

Total property-related expenses (124.4) (106.7)

Project cost from the sale of residential properties 12, 17 - (800.4)

Administrative expenses 20, 21 (59.2) (46.8)

Total operating expenses (183.7) (953.9)

Share of profit in joint ventures 8 74.9 (0.4)

Operating profit before value adjustments 810.8 610.2

Change in fair value of investment property and rental guarantee 6 1,365.0 1,827.5

Operating profit 2,175.8 2,437.7

Financial income 9, 19 15.0 4.2

Financial cost 9, 19 (346.0) (264.8)

Net interest expense and realised interest derivatives (331.1) (260.6)

Change in fair value of interest derivatives 9, 10 150.2 (101.6)

Net financial items (180.9) (362.2)

Profit before income tax 1,994.9 2,075.5

Income tax 16 (421.8) (399.7)

Profit for the year 1,573.1 1,675.9

Profit attributable to non-controlling interests - -

Profit attributable to shareholders of the parent company 1,573.1 1,675.9

Earnings per share attributable to parent company shareholders (amounts in NOK) 23 2.44 3.13

Diluted earnings per share attributable to parent company shareholders (amounts in NOK) 23 2.43 3.09

(Amounts in NOK million) 2021 2020

Profit for the year 1,573.1 1,675.9

Value adjustment of owner-occupied property 6 10.4 10.0

Income tax related to value adjustment of owner-occupied property 16 (2.3) (2.2)

Other comprehensive income that will not be reclassified to profit or loss, net of tax 8.1 7.8

Currency changes on the share in joint venture 8 (28.1) (1.5)

Other comprehensive inc. that subsequently may be reclassified to profit or loss, net of tax (28.1) (1.5)

Total other comprehensive income for the year (20.0) 6.2

Total comprehensive income for the year 1,553.1 1,682.1

Total comprehensive income attributable to shareholders of the parent company 1,553.1 1,682.1

Total comprehensive income attributable to non-controlling interests - -

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 18

Consolidated balance sheet as at 31 Dec

Notes 1 to 28 are an integral part of the consolidated financial statements.

Oslo, 24 March 2022

Norwegian Property ASA

(Amounts in NOK million) Note 2021 2020

Financial derivative instruments 3, 9, 10, 11 16.5 25.5

Investment property 6 24,801.3 23,087.6

Owner-occupied property 6 106.7 97.6

Other fixed assets 7 35.4 37.8

Investment in joint ventures 8 1,084.8 1,013.6

Receivables 13 234.9 264.8

Total non-current assets 26,279.6 24,526.9

Financial derivative instruments 3, 9, 10, 11 0.8 -

Receivables 9, 13 186.7 195.8

Cash and cash equivalents 3, 9 313.5 665.8

Total current assets 501.1 861.6

TOTAL ASSETS 26,780.7 25,388.6

Share capital 22 321.8 321.8

Share premium 3,279.9 3,280.7

Other paid-in equity 7,563.2 7,562.5

Retained earnings 1,671.7 395.9

Total equity 12,836.6 11,560.9

Deferred tax 16 1,685.8 1,268.0

Financial derivative instruments 3, 9, 10, 11 36.2 199.8

Interest-bearing debt 9, 15 9,583.0 10,700.6

Other liabilities 9, 14 2.7 4.4

Non-current liabilities 11,307.8 12,172.8

Financial derivative instruments 3, 9, 10, 11 7.9 2.8

Interest-bearing debt 9, 15 2,421.7 1,396.4

Other liabilities 9, 14 206.6 255.6

Total current liabilities 2,636.2 1,654.8

Total liabilities 13,944.1 13,827.7

TOTAL EQUITY AND LIABILITIES 26,780.7 25,388.6

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 19

Changes in the group’s equity

Notes 1 to 28 are an integral part of the consolidated financial statements.

Consolidated cash flow statement 1 Jan-31 Dec

Notes 1 to 28 are an integral part of the consolidated financial statements.

(Amounts in NOK million)

Total equity 31 December 2019 249.9 (3.1) 1,678.0 7,560.7 (1,251.6) 8,233.9

Profit for the year 22 - - - - 1,675.9 1,675.9

Other comprehensive income for the year 22 - - - - 6.2 6.2

Total comprehensive income for the year - - - - 1,682.1 1,682.1

Paid dividend 24 - - - - (34.6) (34.6)

Share issue 22 75.0 - 1,602.6 - - 1,677.6

Employee share-option scheme 22 - - - 1.8 - 1.8

Total contributions by and distributions to owners

of the parent

75.0 - 1,602.6 1.8 (34.6) 1,644.9

Total equity 31 December 2020 324.9 (3.1) 3,280.7 7,562.5 395.9 11,560.9

Profit for the year 22 - - - - 1,573.1 1,573.1

Other comprehensive income for the year 22 - - - - (20.0) (20.0)

Total comprehensive income for the year - - - - 1,553.1 1,553.1

Paid dividend 24 - - - - (273.5) (273.5)

Share issue 22 - - (0.7) - - (0.7)

Employee share-option scheme 22 - - - 0.7 - 0.7

Settlement of share-option schemes 22 - - - - (3.8) (3.8)

Total contributions by and distributions to owners

of the parent

- - (0.7) 0.7 (277.3) (277.3)

Total equity 31 December 2021 324.9 (3.1) 3,280.0 7,563.3 1,671.6 12,836.6

Note

Total equity

Share capital

Share

premium

Other paid-in

equity

Retained

earnings

Treasury

shares

(Amounts in NOK million) Note 20

21 2020

Profit before income tax 1,994.9 2,075.5

Paid taxes 16 (6.3) -

Net financial items 9, 19 180.9 362.2

Interest received 19 15.0 4.2

Interest and realised interest derivatives paid 15, 19 (339.6) (139.5)

Depreciation of tangible assets 6, 7 5.4 5.6

Change in fair value of investment property 6 (1,365.0) (1,827.5)

Profit from joint ventures 8 (74.9) 1.6

Change in inventory and other current items related to residential properties 12 - 600.0

Change in rental guarantee receivables 6 85.9 -

Change in current items (49.1) (74.3)

Net cash flow from operational activities 447.1 1,007.8

Payment for investment in investment property and other fixed assets 6, 7 (385.9) (5,197.4)

Payment for investment in joint ventures (Nordr) 8 (23.8) (1,020.1)

Net cash flow from investing activities (409.7) (6,217.5)

Repayment of interest-bearing debt 15 (1,812.5) (2,470.4)

New interest-bearing debt 15 1,697.0 6,421.0

Share issues (0.7) 1,677.7

Paid dividend 24 (273.5) (34.6)

Net cash flow from financial activities (389.7) 5,593.7

Net change in cash and cash equivalents (352.3) 384.0

Cash and cash equivalents at 1 January 3 665.8 281.8

Cash and cash equivalents at 31 December 3 313.5 665.8

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 20

NOTE 1: General information

The Norwegian Property ASA property group

primarily owns commercial properties in the Oslo

region. Norwegian Property also owns a share

(joint venture) in the residential development

company Nordr. Nordr’s business consists of both

wholly owned and partly owned plots and

projects. Calculated on the basis of the ownership

share in the projects, Nordr has 1,927 residential

units under construction and a land bank of

approx. 13,400 units in the largest Norwegian and

Swedish cities, with an emphasis on eastern

Norway and the extended Stockholm capital

region in Sweden. Norwegian Property also has a

joint venture with Base Bolig related to a

development project at Forusbeen 35 in

Stavanger.

The holding company, Norwegian Property ASA, is

a public limited company with its headquarters at

Støperigata 2, Oslo (Norway).

The financial statements were adopted by the

board on 24 March 2022 for final approval by the

AGM on 22 April 2022.

NOTE 2: Summary of significant accounting

policies

The principal accounting policies applied in the

preparation of these consolidated financial

statements are set out below. These policies have

been consistently applied to all the years

presented, unless otherwise stated.

2.1 - Basis of preparation

The consolidated financial statements of

Norwegian Property ASA have been prepared in

accordance with the International Financial

Reporting Standards (IFRS) as adopted by the EU

and effective as at 31 December 2021, and

additional requirements pursuant to the

Norwegian Accounting Act as at 31 December

2021.

The financial statements have been prepared on a

historical cost basis, except for certain financial

assets and liabilities (including derivative

instruments), certain classes of property, plant

and equipment and investment property

measured at fair value (see note 4).

Preparation of financial statements in accordance

with the IFRS requires the use of certain critical

accounting estimates. It also requires

management to exercise judgements in the

process of applying the group’s accounting

policies. Areas involving a higher degree of

judgement or complexity, or areas where

assumptions and estimates are significant for the

financial statements, are disclosed in note 5.

No significant changes have been made to

accounting policies compared with the principles

used in the preparation of the financial

statements for 2020.

The group has applied the following amendments

for the first time for the annual reporting period

commencing 1 January 2021: Interest Rate

Benchmark Reform (Phase 2) – amendments to

IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16.

Norwegian Property has not implemented any

other new standards or changes of standards in

the financial statement for 2021. There are no

material new standards and interpretations not

yet implemented.

2.2 - Consolidation policies

A) SUBSIDIARIES

Subsidiaries are all entities (including structured

entities) over which the group has control. The

group controls an entity where the group is

exposed to, or has rights to, variable returns from

its involvement with the entity and has the ability

to affect those returns through its power to direct

the activities of the entity. Subsidiaries are fully

consolidated from the date on which control is

transferred to the group. They are deconsolidated

from the date that control ceases.

Purchases of single-purpose entities owning only

property, with no employees, management or

recorded procedure descriptions, are not

considered as the acquisition of business (IFRS 3

Business Combinations is not applicable). The cost

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 21

of such purchases is capitalised as part of the

acquisition price.

The acquisition method of accounting is used to

account for the acquisition of subsidiaries by the

group. The acquisition cost is measured as the fair

value of assets used as consideration, equity

instruments issued as well as the liabilities

incurred at the transfer of control. Direct costs

related to the acquisition are expensed in the

income statement at the date of acquisition.

Identifiable assets acquired and liabilities and

contingent liabilities are recognised at fair value at

the date of acquisition, irrespective of any

minority interest. The excess cost of acquisition

over the fair value of identifiable net assets

acquired is recorded as goodwill. If the cost of

acquisition is less than the fair value of the net

assets of the subsidiary acquired, the difference is

recognised directly in the income statement at the

date of acquisition.

Intercompany transactions, balances and

unrealised gains on transactions between group

companies are eliminated. Unrealised losses are

eliminated, but they are assessed as an

impairment indicator in relation to the transferred

asset. Accounting policies of subsidiaries have

been changed where necessary to ensure

consistency with the policies adopted by the

group.

B) JOINT ARRANGEMENTS

The group’s share of the joint venture’s net profit

is presented in accordance with the equity

method on a separate line in the consolidated

income statement, and the investment is similarly

recognised on a separate line under fixed assets in

the balance sheet. The group’s share of gain and

loss from the transactions with the joint venture

are eliminated. Accounting policies in the joint

venture are changed when necessary to achieve

conformity with the accounting policies applied by

the group.

2.3 - Segment reporting

Operating segments are reported in a manner

consistent with the internal reporting provided to

the chief operating decision maker. The chief

operating decision maker, responsible for

allocating resources and assessing the

performance of the operating segments, has been

identified as corporate management. See note 17.

2.4 - Foreign currency translation

(A) FUNCTIONAL AND PRESENTATION CURRENCY

Items included in the financial statements of each

of the group’s entities are measured using the

currency of the primary economic environment in

which the entity operates (the functional

currency). The consolidated financial statements

are presented in NOK, which is the parent

company’s functional and presentation currency.

(B) TRANSACTIONS AND BALANCES

Foreign currency transactions are translated into

NOK using the exchange rates prevailing at the

dates of the transactions. Foreign exchange gains

and losses resulting from the settlement of such

transactions and from the translation at year-end

exchange rates of monetary assets and liabilities

denominated in foreign currencies are recognised

in the income statement.

2.5 - Classification of balance-sheet items

Current assets and liabilities comprise items which

mature in less than one year from the balance-

sheet date. Other items are classified as non-

current assets/liabilities.

Financial assets and liabilities are offset and the

net amount recognised in the balance sheet when

there is a legally enforceable right to offset the

recognised amounts and there is an intention to

settle on a net basis or realise the asset and settle

the liability simultaneously.

2.6 Investment property

Property which is held for long-term rental yields

or for capital appreciation, or both, is classified as

investment property. Investment property is

initially measured at acquisition cost, including

the related transaction costs. After the initial

recognition, investment property is carried at fair

value pursuant to IAS 40. The fair value of

investment property reflects, among other things,

the rental income from current leases and the

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 22

assumptions about rental income from future

leases in the light of current market conditions.

Changes in fair value are recorded in the income

statement under change in fair value of

investment property.

Subsequent expenditure is charged to the asset’s

carrying amount only when it is probable that

future economic benefits associated with the item

will flow to the group and the cost of the item can

be measured reliably. Other repair and

maintenance costs are charged to the income

statement during the financial period in which

they are incurred. Expenses related to

accommodating tenants, such as the replacement

of walls, are capitalised together with the asset’s

carrying amount at the same time as the

remaining carrying amount of the replaced

components is derecognised. Costs related to the

termination of leases are capitalised if the main

purpose of the termination is linked to a further

development of the property and are expensed if

the main purpose of the termination is purely a

change of tenant.

Assets under construction for future use as

investment property are recognised in the

construction phase as investment property at fair

value at the completion date minus the remaining

construction costs.

If an investment property is used by the group, it

is reclassified as property, plant and equipment

unless the internal use is insignificant. Fair value

at the date of reclassification is the property’s

acquisition cost. An owner-occupied property is

accounted for at revalued value less accumulated

depreciation and amortisation. An evaluation of

fair value for such properties is carried out in the

same manner as described for investment

properties. An increase in the value of owner-

occupied property is not recognised in the income

statement, but it is recognised as a change of the

revaluation reserve in comprehensive income. An

impairment of the value is recognised against the

revaluation reserve, related to the revaluation of

the specific building. If impairment exceeds the

revaluation reserve, the remainder is recognised

against the income statement.

Tax compensation related to the acquisition of

investment properties (single-purpose entities) is

recognised in the period after the acquisition as a

value adjustment to investment property.

Classification as an investment property held for

sale assumes anticipated realisation within one

year from the balance-sheet date. Investment

properties held for sale are recognised at fair

value as other investment properties.

2.7 - Property, plant and equipment

All property, plant and equipment are stated at

historical cost less depreciation and write-downs.

Historical cost includes expenditure directly

attributable to the acquisition of the item.

Subsequent costs are included in the asset’s

carrying amount or recognised as a separate

asset, as appropriate, only when it is probable

that future economic benefits associated with the

item will flow to the group and the cost of the

item can be reliably measured. All other repairs

and maintenance are charged to the income

statement during the financial period in which

they are incurred.

2.8 - Impairment of non-financial assets

Assets which have an indefinite useful life are not

subject to amortisation and are tested annually

for impairment. Assets which are subject to

amortisation are reviewed for impairment

whenever events or changes in circumstances

indicate that the carrying amount may not be

recoverable. An impairment loss is recognised

with the amount by which the asset’s carrying

amount exceeds its recoverable amount. The

recoverable amount is the higher of an asset’s fair

value less the selling costs and value in use. For

the purposes of assessing impairment, assets are

grouped at the lowest levels for which there are

separately identifiable cash flows.

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 23

2.9 - Financial instruments

(A) GENERAL PRINCIPLES AND DEFINITIONS

Recognition and derecognition

Regular way purchases and sales of financial

assets are recognised on the trade date, being the

date on which the group commits to purchase or

sell the asset. Financial assets are derecognised

when the rights to receive cash flows from the

financial assets have expired or have been

transferred and the group has substantially

transferred all the risks and rewards of ownership.

On the initial recognition of a financial asset or

liability, it is measured at fair value with the

exception of trade receivables, which are

measured at the transaction price with a provision

for expected bad debts on the initial recognition

to the extent that such bad debts have arisen

from the letting business, and where no

significant financing element is included in the

transaction price.

Classification

The group classifies financial instruments in the

categories at fair value through profit and loss and

at amortised cost. The classification depends on

the purpose of the instrument, and the group

assesses the classification of financial instruments

on their acquisition.

(B) FINANCIAL INSTRUMENTS AT FAIR VALUE

THROUGH PROFIT AND LOSS

Financial instruments at fair value through profit

and loss include derivatives unless they are part of

hedging. See note 2.10 related to interest-rate

swaps and forward exchange contracts.

The group’s financial instruments at fair value

through profit and loss also include non-current

receivables related to rental guarantees provided

by the seller of a property, where the seller

guarantees an agreed level for rent and common

cost coverage of vacant premises for an agreed

period. The value of the receivable is calculated as

the discounted value of expected payments under

the rental guarantee. Payments under the

guarantee are accounted for against the

receivable and the receivable will be updated with

any changes of the initial estimate.

(C) FINANCIAL INSTRUMENTS AT AMORTISED

COST

The group’s financial instruments at amortised

cost primarily comprise borrowings and bank

deposits as well as receivables and payables

arising from regular operation.

Borrowings

Borrowings are recognised initially at fair value,

net of transaction costs incurred. Borrowings are

subsequently stated at amortised cost using the

effective interest method. Any differences

between the proceeds (net of transaction costs)

and the redemption value are recognised in the

income statement over the duration of the

borrowings.

Cash and cash equivalents

Cash and cash equivalents are classified at

amortised cost. They include cash in hand, bank

deposits and other current highly liquid

investments with original maturities of three

months or less. Bank overdrafts are included in

borrowings in the balance sheet under current

liabilities.

Trade receivables and other financial assets

Trade receivables and other financial assets are

classified as financial assets measured at

amortised cost. Interest is ignored if it is

insignificant. The Group applies the simplified

approach in IFRS 9 to measure the loss allowance

at lifetime expected credit losses. A provision for

bad debt is determined by estimating the

expected credit losses with reference to the past

default experience of the debtor and an analysis

of the debtor’s current financial position, adjusted

for factors that are specific to the debtors, general

economic conditions of the industry in which the

debtors operate and an assessment of both the

current as well as the forecast direction of

conditions at the reporting date.

There has been no change in the estimation

techniques or significant assumptions made

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 24

during the current reporting period. Any

subsequent payments received against accounts

for which a provision has previously been made

are recognised in the income statement. Trade

receivables and other financial assets are

classified as current assets, unless they are due

more than twelve months after the balance sheet

date. If so, they are classified as non-current

assets.

Trade payables and other non-interest-bearing

liabilities

Trade payables and other non-interest bearing

liabilities are classified as financial liabilities at

amortised cost, and are measured at fair value

upon initial recognition, and subsequently at

amortised cost using the effective interest rate

method. Interest is ignored if it is insignificant.

2.10 - Derivatives and hedging

All the group’s interest-rate swaps are used as

economic hedges. Hedge accounting is not

applied.

Derivatives are initially recognised at fair value at

the date the derivative contract is entered into

and are subsequently recognised continuously at

their fair value.

Changes in the fair value of derivatives are

recognised in the income statement under change

in market value of financial derivative

instruments.

The realised payable part of the interest-rate

swap agreements is presented under financial

cost, with the split shown in a note.

2.11 - Inventory (residential property)

The inventory related to homes under

construction is valued at the lower of acquisition

cost and net realisable value. Acquisition cost

includes all expenditures for purchase and

construction as well as other expenses incurred to

bring the inventory to its present condition.

Construction costs include direct expenditures on

the construction of the property as well as the

indirect fixed and variable costs incurred during

development and construction. Borrowing costs

are included in the acquisition cost until the

properties are ready for sale. Capitalisation of

borrowing costs begins when the property has

received planning permission. Capitalisation of

other direct attributable costs begins when it is

more likely than not that a project will be realised.

The net realisable value is the estimated sales

price in the ordinary way of business, based on

the market price at the reporting date and

discounted for the time value of money, less the

estimated costs for completion and sales. When

properties are sold, the carrying amount is

recognised as a project cost in the profit and loss

account for the same period as the associated

revenue is realised.

2.12 - Share capital, treasury shares, share

premium and share options

Shares are classified as equity when there is no

obligation to transfer cash or other assets. Costs

directly attributable to the issuance of new shares

or options are shown in equity as a deduction, net

of tax, from the proceeds. Treasury shares are

deducted from the share capital in the financial

statements.

Employee options represent rights for employees

to subscribe for shares in the group at a future

time at a predetermined subscription price

(subscription right). Exercise requires continued

employment. The fair value of employee benefits

received in exchange for the granting of options is

calculated as an expense. The total amount to be

expensed over the vesting period reflects the fair

value of the options granted. On the balance-

sheet date, the group revises the estimates of the

number of options expected to be utilised and

changes in estimates are recognised in the income

statement over the remaining vesting period with

a corresponding adjustment of equity. The strike

price after the deduction of possible transaction

costs is credited to share capital and the share

premium when the option is exercised.

2.13 - Deferred income tax

Deferred income tax is calculated in full on all

temporary differences arising between the tax

basis of assets and liabilities and their carrying

amounts in the consolidated financial statements.

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 25

However, the deferred income tax is not

accounted for if it arises from the initial

recognition of an asset or liability in a transaction

other than a business combination which at the

time of the transaction affects neither accounting

nor taxable profit or loss. Deferred income tax is

determined using tax rates and tax laws which

have been enacted or substantially enacted at the

balance-sheet date, and which are expected to

apply when the related deferred income tax asset

is realised or the deferred income tax liability is

settled.

Deferred income tax assets are recognised to the

extent that it is probable that future taxable profit

will be available against which the temporary

differences can be utilised.

Deferred income tax is provided on the temporary

differences arising from investments in

subsidiaries and associates, except where the

timing of the reversal of the temporary difference

is controlled by the group and it is probable that

the temporary differences will not reverse soon.

Pursuant to the exception in IAS 12, deferred tax

is not recognised when buying a company which is

not a business. A provision for deferred tax is

made after subsequent increases in the value

beyond the initial cost, while a fall in value below

the initial cost will only reverse previous

provisions for deferred tax. Furthermore, an

increase in the temporary differences related to

tax depreciation will give grounds for a

recognition of deferred tax.

2.14 - Revenue recognition

Revenue consists of rental income and other

income related to operations. A gain on the sale

of investment property is included under change

in fair value of investment property in the income

statement.

Operating income encompasses the fair value of

the consideration received for services in the

ordinary business. Revenues are presented net of

VAT, discounts and rebates. Service charges are

recognised net as an agent of the tenant.

Therefore, the operating revenues do not include

service charges invoiced to tenants. Accrued

service charges are recognised in the balance

sheet together with payments on account from

tenants, and therefore do not affect profit beyond

an administrative mark-up recognised as income.

The settlement of service charges is made after

the balance-sheet date.

(A) RENTAL INCOME

Rental income is recognised on a linear basis over

the rental period. Lease incentives in the form of

rent rebates, compensation payments or the like

are distributed over the duration of the lease so

that the income is recognised on a linear basis.

The accrued amount is presented under other

receivables in the balance sheet. Upon a tenant’s

termination, the renegotiated remaining cash

flows are recognised over the remaining period

until the premises are vacated.

(B) SALE OF RESIDENTIAL PROPERTY

Residential property are sold to individual

customers, and the revenue is recognised when

the flat is handed over.

(C) OTHER OPERATING INCOME

Other income is recognised as it is earned. Income

is earned when the product or service is delivered.

The income is often earned at the same time as

the transaction. Recognition is delayed for income

not earned at the same time as the transaction,

and that is brought forward for income earned

before the time of the transaction.

2.15 - Dividend distribution

Dividend distribution to the shareholders is

recognised as a liability in the financial statements

in the period in which the dividends are approved

by the shareholders.

2.16 - Interest expense

Interest expenses on borrowings are recognised

under financial costs in the income statement

using the effective interest-rate method.

General and specific borrowing costs directly

attributable to the acquisition, construction or

production of qualifying assets, which are assets

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 26

which necessarily take a substantial period to

complete for their intended use, are added to the

cost of those assets until the assets are

substantially ready for their intended use.

2.17 - Pensions

Norwegian Property ASA operates a defined

contribution plan for all employees. A defined

contribution pension scheme is an arrangement

whereby the group pays fixed (defined) amounts

to a separate legal entity. The group has no legal

or other obligations to pay further amounts.

Contributions are recognised as an employee

benefit expense when they fall due. Prepaid

contributions are capitalised as an asset to the

extent that cash refunds or reductions in future

payments are available.

2.18 - Operating expenses

Property-related expenses include administrative

costs related to the management of the

properties as well as operating and maintenance

costs.

Other property expenses include income-related

costs associated with leasing, marketing and so

forth of the properties, the owner’s share of

service charges for the properties and project-

related property costs.

Administrative expenses relate to costs not

directly related to the operation and letting of

properties, and include costs related to overall

ownership and corporate functions.

NOTE 3: Financial risk management

The group’s activities imply exposure to a variety

of financial risks: market (including foreign

exchange, interest rate and price), credit and

liquidity. The group’s overall risk management

programme focuses on the unpredictability of

financial markets and seeks to minimise the

potential adverse effects on the group’s

profit/loss and equity. The group uses hedging

instruments designed to mitigate certain risks.

Hedge accounting is not applied.

Risk management for the group is managed by a

corporate treasury department in accordance

with guidelines approved by the board.

Management identifies, evaluates and hedges

financial risks in close cooperation with the

group’s operational units. The board provides

written policies for overall risk management and

written guidelines for specific areas, such as

foreign exchange and interest-rate risk.

3.1 – Market risk

FOREIGN EXCHANGE RISK

The group has no lease agreements with tenants

in foreign currencies, and all operational costs are

in practice in NOK.

In 2020, Norwegian Property acquired a share

(joint venture) in the residential development

company Nordr. Nordr has operations in both

Norway and Sweden. The investment is accounted

for in accordance with the equity method on a

single line in the income statement and balance

sheet. The book value in the balance sheet as at

31 December 2021 amounts to NOK 1,084.8

million (NOK 1,013.6 million). The group’s share of

Nordr is partly exposed to SEK, and its share of

translation differences recognised under the

equity method is presented within other

comprehensive income.

PRICE RISK

Rental income is exposed to changes in market

rents, revenue-based rent and changes in the

consumer price index (CPI). The group prefers

long-term leases. The weighted average duration

of rental contracts as at 31 December 2021 was

5.1 years (5.9 years).

Rental agreements for the commercial properties

give a fixed revenue during the lease term. Most

leases have a full CPI adjustment clause allowing

the group to adjust rents in line with CPI changes.

The group seeks to incorporate clauses providing

for such regulation in all new leases. CPI

regulation in 2021 was 3.5 per cent for leases

regulated in October and 5.1 per cent for leases

regulated in November, which increased the

annual rental income as at 31 December 2021 by

NOK 33 million. Rent related to the shopping

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 27

centre at Aker Brygge and Hasle in Oslo is partly

revenue-based.

INTEREST-RATE RISK

The group is subject to interest-rate risk related to

floating rate loans. Norwegian Property’s overall

guidance pursuant to current loan agreements is a

hedging ratio of at least 60 per cent related to

outstanding floating-rate loans. As at 31

December, 71.2 per cent (see note 15) of such

loans (excluding construction loans) were hedged

(75.6 per cent).

To manage interest-rate risk, the group had

entered into interest-rate swap agreements

totalling NOK 5.2 billion as at 31 December (NOK

6.1 billion). The average credit margin on floating-

rate borrowings as at 31 December 2021 was 133

basis points (139 basis points). The average basis

rate of the loan portfolio as at 31 December 2021

was 2.81 per cent (2.94 per cent). The average

remaining maturity of hedging agreements was

6.3 years (6.7 years). Notional principal amounts

and the maturity structure for the group’s total

portfolio of interest-rate hedges as at 31

December are specified in NOK million in the table

below (see also note 10).

If the average interest rate for the group had been

25 basis points higher/lower as at 31 December

2021 and all other variables were constant, this

would have constituted a change in annual

interest expense on the unsecured lending

portfolio of NOK 7 million and a change in the

value of interest-rate swaps of NOK 36 million.

Increases in market interest rates can lead to

increased yield levels for the group's properties,

which in turn can affect the valuations of the

properties.

3.2 - Credit risk

The majority of the group’s rental revenues come

from solid tenants. Tenants are preferably large,

solid companies and public institutions, which

reduces the risk related to leases. New tenants

are checked with credit rating agencies for an

acceptable credit history. Most tenants have

provided bank guarantees or made deposits of

sums equivalent to three months’ rent. Rents are

generally invoiced quarterly in advance. Credit

loss has historically been limited. The group’s

trade receivables at the balance-sheet date are

entirely in NOK.

3.3 - Liquidity risk

The group aims to ensure that liquidity/credit

facilities are sufficient to meet its foreseeable

obligations. In addition, it will have a reasonable

capacity to meet unforeseen obligations. The

funding strategy aims to maintain flexibility and

withstand fluctuations in rental income. One goal

is that the liquidity reserve should consist as far as

possible of available revolving credit and overdraft

facilities, rather than cash and cash equivalents.

The group’s liquidity reserve as at 31 December is

specified in the table below.

As described hereinabove, the group has a high

level of hedging against changes in market

interest rates, reducing the need for liquidity

reserves to meet unforeseen obligations related

to these areas. The group has generated positive

cash flows from operational activities in both 2021

(NOK 447.1 million) and 2020 (NOK 1,007.8

million). Additional liquidity risks primarily relate

to servicing instalments and the maturity of

liabilities. The maturity structure of liabilities for

the group is specified in the table below. The

classification is based on the maturity specified in

the contracts. The figures in the table specify the

timing of repayment of the principal amounts

(NOK million).

Year 2021 2020

< 1 year (1,220.0) (900.0)

1-2 years (500.0) (1,220.0)

3-5 years (1,650.0) (1,950.0)

Over 5 years (1,800.0) (2,000.0)

Notional principal amount (5,170.0) (6,070.0)

(Amounts in NOK million) 2021 2020

Cash and cash equivalents

313.5 665.8

- of which restricted cash and cash

equivalents

(3.3) (2.6)

Available cash and cash equivalents

310.3 663.3

Unused credit and overdraft facilities

1,800.0 910.0

Liquidity reserve

2,110.3 1,573.3

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 28

2021

1

:

2020

1

:

1

The difference between the carrying amount and expected cash flow

for interest-bearing debt reflects capitalised costs and estimated

interest costs based on the average interest rate as at 31 December.

A number of financing activities were carried out

in 2021. Several new bond loans have been

established. A number of extensions of existing

bond loans have also been made and several

bonds have been repurchased. Average interest

rates and margins decreased during the year.

The share of bond loans has increased from 84

per cent at the beginning of the year to 96 per

cent at the end of the year.

Interest-bearing bank and bond debt in the

balance sheet totalled NOK 12,004.8 million as at

31 December 2021, with non-current interest-

bearing debt accounting for NOK 9,583 million

and current interest-bearing debt for NOK 2,421.7

million. Current interest-bearing debt as at 31

December 2020 related to facilities maturing in

2022, which will be refinanced during the year.

3.4 - Capital risk management

The group’s objectives relating to capital

management are to ensure continued operation

in order to provide returns for shareholders and

benefits for other stakeholders. To achieve this,

the aim is to maintain a capital structure which

helps to reduce the cost of capital.

Norwegian Property’s goal is to pay a dividend to

its shareholders amounting to 30-50 per cent of

its ordinary profit after tax payable, but before

fair-value adjustments. The dividend can be

higher in times with good cash flow. Before a

dividend is determined, an assessment is made of

the group’s financial position and prospects,

including the availability of attractive investment

opportunities.

Capital management seeks to maintain a good

balance between debt and equity. The group must

have a satisfactory equity ratio, but where the

main focus relates to the loan-to-value (LTV) ratio.

The latter is calculated as gross debt less cash and

interest-bearing receivables divided by the gross

property value. The group’s goal is to have an LTV

ratio of 45-55 per cent. The LTV ratio as at 31

December is specified in the table below. A

condition of the group’s overdraft facilities is that

the LTV ratio should not exceed 75 per cent.

Agreed requirements related to the LTV ratio in

the loan agreements were met with a good

margin both as at 31 December and at the interim

reporting dates for 2021 and 2020. To change the

capital structure, the group may adjust the level

of dividends paid to shareholders, return capital

to shareholders, issue new shares or sell assets to

redeem debt.

1

Applies to the book value of the investment in Nordr (joint venture),

adjusted for the EPRA-revaluation of the investment.

(Amounts in NOK million)

Interest-

bearing debt

Other

liabilities at

amortised

cost

< 1 year 2,737.9 167.5

1-2 years 676.4 -

3-5 years 6,163.9 -

Over 5 years 3,906.5 -

Expected cash flow 13,484.7 167.5

Book value 12,004.8 167.5

(Amounts in NOK million)

Interest-

bearing debt

Other

liabilities at

amortised

cost

< 1 year 1,737.2 214.4

1-2 years 3,104.9 -

3-5 years 4,732.2 -

Over 5 years 4,162.8 -

Expected cash flow 13,737.1 214.4

Book value 12,097.1 214.4

(Amounts in NOK million) 2021 2020

Long-term interest-bearing liabilities

9,583.0 10,700.6

Short-term interest-bearing liabilities

2,421.7 1,396.4

Interest-bearing receivables

(96.6) (99.9)

Cash and cash equivalents

(313.5) (665.8)

Net interest-bearing liabilities

11,594.7 11,331.3

Market value of property portfolio

25,143.0 23,450.0

Market value of investment in joint

ventures

1

2,342.8 1,942.0

Market value of property portfolio

and investment in joint ventures

27,485.7 25,392.0

Net loan to value (per cent)

42.2 44.6

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 29

NOTE 4: Assessment of fair value

The consolidated financial statements have been

prepared on a historical cost basis except for

investment property and some financial assets

and financial liabilities (including derivative

instruments), which are recognised at fair value

through profit and loss.

4.1 - Investment property

According to the group’s valuation process, the

finance and investment department is responsible

for the preparation of valuations of investment

property for use in the financial statements. The

department is responsible for a quarterly

valuation of the group’s investment properties at

fair value. The group’s valuation process is based

on external valuations, supplemented by internal

analysis where the group makes an assessment

and determines whether the external valuations

give an accurate picture of the fair value of the

investment properties. Inspections and technical

reviews of all the properties are performed

regularly. The valuations are reviewed quarterly

as a key part of the audit committee’s quality

assurance of the interim and annual accounts.

Based on this valuation process, all properties

were valued by two independent professional

appraisers as at 31 December 2021. Cushman &

Wakefield and Akershus Eiendom have prepared a

valuation of all the properties. The group has

concluded that an average of the valuations may

be used as the basis for the accounting of

investment properties at fair value as at 31

December 2021. See also note 5 for critical

accounting estimates and judgements.

4.2 - Financial instruments and derivatives

The estimated fair value of the group’s financial

instruments is based on market prices and

valuation methods as described below.

INTEREST-BEARING LIABILITIES

The group recognises interest-bearing liabilities at

amortised cost. Notes to the financial statements

(see note 15) provide information on the

estimated fair value of interest-bearing liabilities.

Bonds are valued at the market price as at 31

December and bank loans at the estimated fair

value where account is taken of the estimated

difference between the current margin and

market conditions.

TRADE RECEIVABLES/OTHER RECEIVABLES AND

TRADE PAYABLES/OTHER LIABILITIES

In principle, these items are recognised initially at

fair value and measured at amortised cost in

subsequent periods. However, discounting is not

normally assumed to have a significant effect on

this type of receivable and liability.

DERIVATIVES

The fair value of financial derivatives, including

interest-rate swaps and currency forward

exchange contracts/swaps, is determined by the

net present value of future cash flows, calculated

using quoted interest-rate curves and exchange

rates at the balance-sheet date. The technical

calculations are generally performed by the

group’s banks. The group has checked these

valuations and tested them for reasonableness.

RENTAL GUARANTEE RECEIVABLES

Rental guarantee receivables relate to rental

guarantees provided by the seller of properties,

where the seller guarantees an agreed level for

rent and common costs of vacant premises for an

agreed period. The valuation is based on an

internal assessment. The value of the receivable is

calculated as the discounted value of expected

payments under the rental guarantee. Payments

under the guarantee are accounted for against

the receivable, and the receivable will be updated

with any changes to the initial estimate.

NOTE 5: Critical accounting estimates and

judgements

Estimates and judgements are continually

evaluated, and are based on historical experience

and other factors, including expectations about

future events which are believed to be reasonable

under current circumstances.

Management makes estimates and assumptions

concerning the future. The resulting accounting

estimates will, by definition, seldom equal the

actual figures. The estimates and assumptions

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 30

which involves the greatest risk of causing a

material adjustment to the carrying amounts of

assets and liabilities in the next financial year are

outlined below.

5.1 - Fair value of investment properties

Investment property is valued at its fair value

based on a quarterly valuation update.

Procedures for determining fair value for

investment properties are described in note 4. In

line with these policies, the portfolio of

commercial properties is valued every quarter on

the basis of external valuations.

Properties are valued by discounting future cash

flows. Both contractual and expected cash flows

are included in the calculations. Therefore, the

fair-value assessment of investment properties

largely depends on assumptions related to market

rents, discount rates and CPI adjustments. Market

rents are based on individual assessments of each

property and on segmentations of different areas

within the properties if relevant. To the extent

that a specific development potential is associated

with a property, an assessment is made of

whether this supports or influences fair value.

Updated macroeconomic assumptions for

interest-rate levels, inflation expectations and so

forth are applied in the calculations. Inflation

expectations are based on consensus views from

banks and public statistical agencies (from 1.6 to

3.5 per cent in the calculation period). Based on

an assessment of the properties, tenants and

macroeconomic conditions at the balance-sheet

date, cash flows are discounted using discount

rates based on individual assessments of each

property.

The sensitivity of the fair-value assessment of

investment properties depends on assumptions

related to yield, interest rates, market rents and

operating costs for the properties. The table

1

below presents examples of how changes related

to each of these variables influenced property

values as at 31 December 2021, assuming all other

variables remained constant (amounts in NOK

million).

1

The calculations have been performed by Cushman & Wakefield in

connection with the valuations at 31 December 2021.

5.2 - Fair value of financial derivatives

The group’s financial derivatives include interest-

rate swap contracts and currency forward/swap

contracts. The procedures for valuation are

described in note 4. The calculations are

performed by the group’s banks. The group has

checked these valuations and tested them for

reasonableness. The valuations involve a small

degree of discretionary assessments, and the

company’s internal assessments deviate to a very

small extent from the external valuations.

5.3 - Fair value of rental guarantee receivables

Rental guarantee receivables relate to rental

guarantees provided by the seller of properties.

The procedures for valuation are described in

note 4. The valuation is based on internal

assessments. The value of the receivable is

calculated as the discounted value of expected

future payments under the rental guarantee.

Therefore, the fair-value assessment largely

depends on the assumptions related to future

rentals, discount rates and CPI adjustments.

Management’s rental expectations are the basis

for the assessments, together with a discount rate

of three per cent and comparable inflation

expectations as used in the valuation of

investment properties.

5.3 - Climate risk in the accounts

Climate risk can represent financial risk that must

be reflected in the accounts.

Further information on climate risk is provided in

the declaration of corporate social responsibility

as well as in the table in the risk and risk

management section of the annual report.

Climate risk is linked to both the impact of climate

change on the company and the impact the

Variables Changes of variables Value change

Exit yield + 0.25 per cent

(773)

Discount rate + 0.25 per cent

(505)

Operating costs + NOK 25 per sqm

(136)

Market rent + 10 per cent

1 471

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 31

company’s activities has on the climate. Both of

these factors can be financially significant for the

company, and the materiality assessments are

often referred to as double materiality. Climate

risk can be linked both to physical risk where

there is a risk of assets being damaged or

shortened in life, and to transitional risk due to

changes in the market and regulatory conditions.

Climate risk can affect future cash flows and thus

the valuation of assets and liabilities in the

accounts. The most important assessment for

Norwegian Property is how climate risk affects the

valuation of investment property.

VALUATION OF INVESTMENT PROPERTY

Physical risk associated with the properties is first

and foremost related to the extent to which

conditions such as warmer climates, increased

water levels, more extreme weather, etc. affect

the properties.

Transition risks are divided into market and

regulatory components.

Market risk includes the risk for increased

demand for more environment-friendly premises,

more demanding environmental standards from

investors and banks, increased insurance

premiums if damage from climate change

becomes extensive, technology risk related to

new energy solutions and building standards and

reputational risk as climate-related awareness

spreads.

Examples of regulatory risk are government

requirements and permits in such areas as

building standards, traffic and infrastructure.

Taxes could rise in line with increased public

spending.

Norwegian Property has had a scenario analysis

carried out by external experts in the field, who

has analysed risk elements related to the

company’s real estate portfolio. No critical factors

have been identified that obviously have a

material impact on the market value of the

properties.

In preparing the external valuations of the

company’s properties, it has been assessed with

the valuers to what extent climate risk affects the

valuation. The assessment is that so far there are

no significant factors related to climate risk that

affect the market’s pricing of the property

portfolio. It is assumed that this assessment will

change over time as the risk elements to a greater

extent may affect future cash flows for the

properties.

NOTE 6: Investment property, owner-

occupied property and guarantee receivables

6.1 – Development in carrying amounts

Changes to the balance-sheet items of investment

property, owner-occupied property and

guarantee receivables are specified in the table

below. Changes in the market value of investment

property and guarantee receivables are

recognised on a separate line in the profit and loss

statement.

2021:

(Amounts in NOK million)

Investment

property

Owner-

occupied

property

Guarantee

receivables

Total

Book value at 1 January 23,087.6 97.6 264.8 23,450.0

Disposals (0.5) - - (0.5)

Additions 397.3 - - 397.3

Payments related to the

rental guarantee

- - (85.9) (85.9)

Fair value adjustment

recognised in profit and

loss

1,316.9 - 48.1 1,365.0

Interest income

recognised in profit and

loss

- - 7.9 7.9

Fair value adjustment

recognised against the

revaluation reserve

- 9.1 - 9.1

Book value at 31

24,801.3 106.7 234.9 25,143.0

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 32

2020:

1

Applies to the sale of a 50 per cent share in the Forusbeen 35

property in Stavanger as at 31 December 2020.

2

Additions in 2020 include NOK 4,724.1 million related to the

acquisition of the property at Snarøyveien 30. An estimated value of

NOK 264.1 million related to the rental guarantee provided by the

seller of the property is presented as a receivable in the balance sheet

as at 31 December 2020. The seller of the property guarantees an

agreed level for rent and common cost coverage of vacant premises

from the takeover and until mid-2027.

Rental income and property expenses related to

investment properties are stated in the income

statement. The maturity structure for non-

cancellable leases related to investment property

is specified in note 18.

As at 31 December 2021, financial vacancy for the

investment properties was 5.5 per cent. Operating

expenses for vacant space and the owner’s share

of service charge expenses totalled NOK 32.1

million for 2021 (NOK 30.1 million).

Apart from covenants in loan agreements, no

restrictions apply to the timing of the realisation

of investment properties or how the revenue

from any sale can be used.

The group had no significant contractual

obligations for construction contracts related to

investment properties as at 31 December in 2021

or 2020.

6.2 - Fair-value assessment

The following table shows the fair-value

assessment of properties when using different

types of inputs.

2021

1

:

2020

1

:

1

Level 1: valuation based on quoted prices in active markets for

identical assets. Level 2: valuation based on observable market

information not covered by level 1. Level 3: valuation based on

information not observable under level 2.

The group’s policy is to recognise transfers into

and out of fair-value hierarchy levels at the date

of the event or change in circumstances which

caused the transfer. There were no transfers

between the levels during 2021 or 2020.

(Amounts in NOK million)

Investment

property

Owner-

occupied

property

Guarantee

receivables

Total

Book value at 1 January 16,469.3 89.0 - 16,558.3

Disposals

1

(86.9) - - (86.9)

Additions

2

4,877.5 - 264.1 5,141.6

Change in market value

recognised in profit and

loss

1,827.5 - - 1,827.5

Fair value adjustment

recognised against the

revaluation reserve

- 10.0 - 10.0

Interest income

recognised in profit and

loss

- - 0.7 0.7

Depreciation recognised

against the revaluation

- (1.3) - (1.3)

Book value at 31

23,087.6 97.6 264.8 23,450.0

(Amounts in NOK million)

Investment

property

Owner-

occupied

property

Guarantee

receivables

Given market value for

corresponding assets and

liabilities (level 1)

- - -

Other significant observable

input (level 2)

- - -

Other significant non-

observable input (level 3)

24,801.3 106.7 234.9

Total estimated fair value 24,801.3 106.7 234.9

(Amounts in NOK million)

Investment

property

Owner-

occupied

property

Guarantee

receivables

Given market value for

corresponding assets and

liabilities (level 1)

- - -

Other significant observable

input (level 2)

- - -

Other significant non-

observable input (level 3)

23,087.6 97.6 264.8

Total estimated fair value 23,087.6 97.6 264.8

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 33

NOTE 7: Other fixed assets

7.1 – Fixed assets

Changes in other fixed assets are specified in the

table below.

The group uses linear depreciation. The economic

life of the assets is set at four years for IT

equipment, five years for licences, cars and

furnishings and seven years for other equipment.

It is set at 20 years for the energy centre at Aker

Brygge.

7.2 - Leases

Significant leases are capitalised in accordance

with IFRS 16 Leases, which states that both an

asset (the right to use the leased object) and a

financial liability (the value of future lease

payments) are capitalised.

The group has certain leases which are capitalised

as specified below.

The capitalised lease agreements include a lease

for office space at Aker Brygge in Oslo which is

used in the business of a subsidiary. In addition,

the company rents company cars used in

connection with the operation of the group's

properties. The right of use is recognised as an

asset under other tangible fixed assets, with the

lease obligation recognised as a liability under

other liabilities in the balance sheet.

NOTE 8: Joint ventures

In 2021, Norwegian Property acquired Nordr

together with Fredensborg and Union Real Estate

Fund III. While Norwegian Property and

Fredensborg are equal partners, each holding 42.5

per cent of the preferred shares (A-shares), Union

owns 15 per cent of the preferred shares (B-

shares). Only preferred A-shares have voting

rights in the general meeting of the company. The

preferred A and B shares have a pre-emptive right

to payments from the company. C-shares are

entitled to payments from the company only after

a certain return on invested capital has been

achieved. C-shares are earmarked for senior

executives in Nordr, and at the end of 2021

represent an ownership interest of 0.3 per cent.

Norwegian Property owns 42.4 per cent of all

shares in the company.

(Amounts in NOK million)

Other

fixed

assets

Energy

distri-

bution

system

(Aker

Brygge)

Total

Acquisition costs:

At 31 December 2019 50.5 42.2 92.7

Additions 2020 0.7 0.9 1.6

At 31 December 2020 51.2 43.1 94.3

Additions 2021 0.3 1.3 1.6

At 31 December 2021 51.5 44.4 95.9

Accumulated depreciation:

At 31 December 2019 41.2 10.9 52.1

Additions 2020 2.2 2.1 4.3

At 31 December 2020 43.4 13.0 56.4

Additions 2021 1.9 2.2 4.1

At 31 December 2021 45.3 15.2 60.5

Book value:

At 31 December 2020 7.7 30.1 37.8

At 31 December 2021 6.1 29.3 35.4

(Alle beløp i mNOK)

Leases

for

co

mpany

cars

Lease

for

offi

ces

Total

Net present value of leases as

of 31 December 2020

0.9 2.9 3.9

- Short-term leases - - -

- Leases with low rent - - -

Carrying amount of rental

obligation as of 1 January 2021

0.9 2.9 3.9

Additions in 2021 - - -

Installments in 2021 (0.4) (1

.2) (1.6)

Carrying amount of rental

obligation as of 31 December

20

21

0.5 1.8 2.

3

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 34

Nordr has residential units under construction and

a substantial land bank in Norway and Sweden.

The land bank is largely located in the largest

Norwegian and Swedish cities, with an emphasis

on eastern Norway and the extended Stockholm

capital region in Sweden. Nordr's business

consists of both wholly owned and partly owned

plots and projects. Entity’s over which Nordr has

control are fully consolidated in the accounts for

the Nordr group. Nordr’s share of joint venture’s

net profit and net equity is presented in

accordance with the equity method in the

accounts for the Nordr group.

At the year end of 2020, the property at

Forusbeen 35 in Stavanger had been reregulated

from a commercial building to a property with a

combined residential and commercial purpose.

Norwegian Property sold a 50 per cent share in

the project to Base Bolig, and thus owned the

project as a joint venture from 31 December

2020.

The changes for the year in the balance-sheet

item on net investment in joint ventures are

specified in the table below.

1

Currency risk associated with Nordr’s business in Sweden is not

hedged.

The group’s share of income in joint ventures is

specified in the table below.

2021:

2020:

1

The group’s share of gain from disposal is related to Badehusgata

33-39.

(Amounts in NOK million) 2021 2020

Book value 1 January 1,013.6 -

Acquisition of joint ventures 23.8 1,020.1

Share of profit and loss 74.9 (4.9)

Currency changes

1

(28.1) (1.5)

Reduction in receivables 0.6 -

Book value 31 December 1,084.8 1,013.6

(Amounts in NOK million) Nordr

Forus-

been 35

Total

Revenues 3,058.1 1.8 3,059.9

Project cost from sale of residential units (2,669.9) - (2,669.9)

Other operating expenses (355.2) (3.3) (358.5)

Share of profit in joint ventures 183.0 - 183.0

Operating profit 216.1 (1.5) 214.6

Net financial items (11.5) - (11.5)

Profit before income tax 204.5 (1.5) 203.0

Income tax (14.7) 0.3 (14.4)

Profit for the period 189.8 (1.2) 188.6

The group's share of profit for the period 75.5 (0.6) 74.9

The group's share of gain from sale for the

period

- - -

The group's share of profit and gain from sale

for the period

75.5 (0.6) 74.9

The group's share of other comprehensive

income for the period

(28.1) - (28.1)

The group's share of total comprehensive

income for the period

47.4 (0.6) 46.8

(Amounts in NOK million) Nordr

Forus-

been 35

Total

Revenues 1,483.5 - 1,483.5

Project cost from sale of residential units (1,351.5) - (1,351.5)

Other operating expenses (233.0) - (233.0)

Share of profit in joint ventures 116.0 - 116.0

Operating profit 15.1 - 15.1

Net financial items (35.3) - (35.3)

Profit before income tax (20.2) - (20.2)

Income tax 4.5 - 4.5

Profit for the period (15.7) - (15.7)

The group's share of profit for the period (4.9) - (4.9)

The group's share of gain from sale for the

period

1

4.5 - 4.5

The group's share of profit and gain from sale

for the period

(0.4) - (0.4)

The group's share of other comprehensive

income for the period

(1.5) - (1.5)

The group's share of total comprehensive

income for the period

(2.0) - (2.0)

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 35

The group’s share of equity in joint ventures is

specified in the table below.

2021:

2020:

NOTE 9: Financial instruments

Financial assets represent contractual rights for

the group to receive cash or other financial assets

in the future. Financial liabilities correspondingly

represent contractual obligations for the group to

make future payments. Financial instruments are

included in several accounting lines in the group’s

balance sheet and income statement, and they

are classified in different categories in accordance

with their accounting treatment.

The carrying amount of financial instruments in

the group’s balance sheet is considered to provide

a reasonable expression of their fair value, with

the exception of interest-bearing debt. The fair

value of interest-bearing debt is described in note

15.

A specification of the group’s financial

instruments is presented below.

(Amounts in NOK million) Nordr

Forus-

been 35

Total

Investment property - 1

7.3 17.3

Other fixed assets 31.2 -

31.2

Investment in joint ventures 1,373.6 - 1,373.6

Land bank and residential projects 8,690.8 9

2.0 8,782.8

Receivables 935.3 0

.9 936.1

Cash and cash equivalents 1,005.9 0

.2 1,006.1

Deferred tax (396.7) 0

.3 (396.4)

Interest bearing liabilities (6,340.7) - (

6,340.7)

Shareholder debt

1

- (108.4) (108.4)

Other liabilities (2,752.8) (3

.5) (2,756.3)

Equity (2,546.6) 1.1 (2,545.4)

The group's share of equity (1,084.8) - (

1,084.8)

(Amounts in NOK million) Nordr

Forus-

been 35

Total

Investment property - 86.9 86.9

Other fixed assets 87.2 - 87.2

Investment in joint ventures 1,189.5 - 1,189.5

Land bank and residential projects 7,073.9 - 7,073.9

Receivables 1,372.5 - 1,372.5

Cash and cash equivalents 951.6 - 951.6

Deferred tax (97.6) - (97.6)

Interest bearing liabilities (5,769.8) - (5,769.8)

Shareholder seller credit

1

- (86.9) (86.9)

Other liabilities (2,405.1) - (2,405.1)

Equity (2,402.2) - (2,402.2)

The group's share of equity (1,013.6) - (1,013.6)

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 36

2021

1

:

2020

1

:

1

Accounting items not specified in the table above, but included in the group’s financial statements, do not contain financial instruments.

(Amounts in NOK million)

Financial assets:

No

n-current derivatives 16.5 - - 16.5

Non-current receivables 234.9 - - 234.9

Current receivables - 107.0 79.7 186.7

Current derivatives 0.8 - - 0.8

Cash and cash equivalents - 313.5 - 313.5

Financial liabilities:

Non-current derivatives 36.2 - - 36.2

Non-current interest-bearing liabilities - 9,583.0 - 9,583.0

Other non-current liabilities - - 2.7 2.7

Current derivatives 7.9 - - 7.9

Current interest-bearing liabilities - 2,421.7 - 2,421.7

Other current liabilities - 167.5 39.1 206.5

Profit/loss related to financial instruments:

Financial income - 15.0 - 15.0

Financial cost - (346.0) - (346.0)

Change in market value of financial instruments 150.2 - - 150.2

Gain/loss recognised in comprehensive income:

Recognised in comprehensive income - - - -

Total

Non-financial

assets and

li

abilities

Financial

instruments at

fa

ir value through

profit or loss

Amortised cost

(Amounts in NOK million)

Financial assets:

No

n-current derivatives 25.5 - - 25.5

Non-current receivables 264.8 - - 264.8

Current receivables - 116.2 79.6 195.8

Current derivatives - - - -

Cash and cash equivalents - 665.8 - 665.8

Financial liabilities:

Non-current derivatives 199.8 - - 199.8

Non-current interest-bearing liabilities - 10,700.6 - 10,700.6

Other non-current liabilities - 2.1 2.3 4.4

Current derivatives 2.8 - - 2.8

Current interest-bearing liabilities - 1,396.4 - 1,396.4

Other current liabilities - 214.4 41.2 255.6

Profit/loss related to financial instruments:

Financial income - 4.2 - 4.2

Financial cost - (264.8) - (264.8)

Change in market value of financial instruments (101.6) - - (101.6)

Gain/loss recognised in comprehensive income:

Recognised in comprehensive income - - - -

Amortised cost

Total

Financial

instruments at

fa

ir value through

profit or loss

Non-financial

assets and

li

abilities

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 37

NOTE 10: Derivatives

10.1 - Specification of derivatives in the financial

statements

The group is subject to interest-rate risk related to

floating rate loans. The general policy in

accordance with the applicable loan agreements is

that at least 60 per cent of the group’s interest-

bearing debt at any time will be hedged.

Derivatives are carried at fair value. A

specification of the derivatives in the balance

sheet as at 31 December is shown in the

following.

2021:

2020:

Changes for the year to net derivatives in the

balance sheet are specified in the table below.

10.2 - Interest-rate derivatives

A specification of principal amounts per currency

for the group’s interest-rate derivatives as at 31

December is presented below. The maturity

structure for the derivatives is specified in note 3.

The floating interest rate is three-months Nibor

for all contracts. Management assumes that the

IBOR-reform will not have a significant impact for

the group.

Gains and losses for hedge accounting contracts

are recognised in other comprehensive income

until the underlying hedged loan is repaid.

10.3 - Fair value of derivatives

Fair value is established on the basis of the

following methods:

- Level 1: valuation based on quoted prices

in active markets for identical assets.

- Level 2: valuation based on observable

market information not covered by level

1.

- Level 3: valuation based on information

not observable under level 2.

All financial derivatives in the balance sheet relate

to interest-rate swap agreements, where fair

value is determined in accordance with level 2.

The group’s policy is to recognise transfers into

and out of fair-value hierarchy levels at the date

of the event or change in circumstances which

caused the transfer. No transfers were made

between the levels in 2021 or 2020.

NOTE 11: Presentation of financial assets and

liabilities subject to net settlement

The purpose of the note is to show the potential

effect of net settlements for the group. The tables

below specify the derivative positions in the

balance sheet with related information as at 31

December.

(Amounts in NOK million) Assets Liabilities

Interest rate hedging contracts 16.5 36.2

Exchange rate hedging contracts - -

Derivatives, non-current

assets/liabilities

16.5 36.2

Interest rate hedging contracts 0.8 7.9

Exchange rate hedging contracts - -

Derivatives, current assets/liabilities 0.8 7.9

Total derivatives 17.3 44.2

Net financial derivatives in the

balance sheet

(26.9)

(Amounts in NOK million) Assets Liabilities

Interest rate hedging contracts 25.5 199.8

Exchange rate hedging contracts - -

Derivatives, non-current

assets/liabilities

25.5 199.8

Interest rate hedging contracts - 2.8

Exchange rate hedging contracts - -

Derivatives, current assets/liabilities - 2.8

Total derivatives 25.5 202.6

Net financial derivatives in the

balance sheet

(177.1)

(Amounts in NOK million) 2021 2020

Net book value of derivatives, 1

January

(177.1) (75.5)

Net fair value adjustments of

derivatives during the year

150.2 (101.6)

,

December

(26.9) (177.1)

Currency 2021 2020

Notional principal

amount

NOK 5,170.0 6,070.0

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 38

2021:

2020:

NOTE 12: Inventory

The change in the balance sheet item for

inventories in 2020 was in its entirety related to a

project which was previously under development

at Hasle in Oslo, as specified in the table below.

All the units were sold and delivered to the end

users in 2019 and 2020.

NOTE 13: Receivables

13.1 - Current receivables

Current receivables in the balance sheet as at 31

December are specified in the table below.

1

Entirely related to the receivable on the joint venture for the

property at Forusbeen 35 as at 31 December 2021. As at 31

December 2020 receivables related to a NOK 86.9 million seller credit

to the joint venture for Forusbeen 35 and NOK 13 million in a seller

credit related to the sale of Badehusgata 33-39.

13.2 - Non-current receivables

Current receivables as at 31 December are

specified in the table below.

(Amounts in NOK million)

Non-current

assets

derivatives

Current

assets

derivatives

Total

Gross financial assets

(interest derivatives)

16.5

0.8 17.3

Gross assets presented net - - -

Book value 16.5 0.8 17.3

Financial instruments

(interest derivatives)

(16.5) (0.8) (17.3)

Security in cash - - -

Net amount - - -

(Amounts in NOK million)

Non-current

liabilities

derivatives

Current

liabilities

derivatives

Total

Gross financial liabilities

(interest derivatives)

36.2 7.9 44.2

Gross liabilities presented net - - -

Book value 36.2 7.9 44.2

Financial instruments

(interest derivatives)

(16.5) (0.8) (17.3)

Security in cash - - -

Net amount 19.8 7.1 26.9

(Amounts in NOK million)

Non-current

assets

derivatives

Current

assets

derivatives

Total

Gross financial assets

(interest derivatives)

25.5 - 25.5

Gross assets presented net - - -

Book value 25.5 - 25.5

Financial instruments

(interest derivatives)

(25.5) - (25.5)

Security in cash - - -

Net amount - - -

(Amounts in NOK million)

Non-current

liabilities

derivatives

Current

liabilities

derivatives

Total

Gross financial liabilities

(interest derivatives)

199.8 2.8 202.6

Gross liabilities presented net - - -

Book value 199.8 2.8 202.6

Financial instruments

(interest derivatives)

(25.5) - (25.5)

Security in cash - - -

Net amount 174.3 2.8 177.1

(Amounts in NOK million)

2021 2020

Book value 1 January - 708.5

Accrued cost during the period - 91.9

Cost of units sold - (800.4)

Book value 31 December - -

(Amounts in NOK million) 2021 2020

Accounts receivable 17.9 24.7

Provision for impairment of receivables (7.5) (8.4)

Net accounts receivable 10.4 16.3

Loans to joint ventures and deferred

settlement on sale of properties

1

96.6 99.9

Public duties 13.6 1.9

Other current receivables 66.1 77.7

Total other current receivables 176.3 179.5

Total current receivables 186.7 195.8

(Amounts in NOK million) 2021 2020

Rent guarantee receivables (see note 6) 234.9 264.8

Total non-current receivables 234.9 264.8

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 39

NOTE 14: Other liabilities

14.1 - Other current liabilities

Other current liabilities as at 31 December are

specified in the table below.

14.2 - Other non-current liabilities

Other non-current liabilities as at 31 December

are specified in the table below.

NOTE 15: Interest-bearing debt

The table below presents an overview as at 31

December of the group’s interest-bearing debt,

including hedging ratio, average interest rate and

remaining duration.

1

All interest-rate swaps and loans with fixed rate which had

commenced at the balance-sheet date.

Group interest-bearing non-current and current

debt as at 31 December is specified in accordance

with the type of debt in the table below.

2021:

2020:

1

The fair value of bonds are based on given market values for corre-

sponding assets and liabilities (level 1). The fair value of bank bor-

rowings are based on other significant non-observable input (level 3).

Level 1: valuation based on quoted prices in active markets for

identical assets. Level 2: valuation based on observable market

information not covered by level 1. Level 3: valuation based on

information not observable under level 2.

The group’s policy is to recognise transfers into and out of fair value

hierarchy levels at the date of the event or change in circumstances

which caused the transfer. There were no transfers between the

levels during 2021 or 2020.

The total fair value of interest-bearing debt

consists of bonds valued at their market price as

at 31 December and bank loans at estimated fair

value, where account is taken of the estimated

difference between the current margin and

market conditions.

Changes for the year to interest-bearing debt in

the balance sheet are specified in the table below.

(Amounts in NOK million) 2021 2020

Trade payables 39.2 41.4

Public duties 6.4 6.4

Accrued salaries 7.0 6.3

Accrued interest 72.6 66.2

Lease liability (see note 7) 1.6 1.6

Prepaid income 25.7 28.5

Accrued cost and other debts 54.0 105.1

Total other current liabilities 206.6 255.6

(Amounts in NOK million) 2021 2020

Lease liability (see note 7) 0.7 2.3

Pension liabilities (see note 21) 2.0 2.1

Total other non-current liabilities 2.7 4.4

2021 2020

Total interest-bearing debt (NOK

million) 12,004.8 12,097.1

Of which hedged (NOK million)

1

8,547.0 9,147.0

Interest hedging ratio (per cent) 71.2 75.6

Cash and cash equivalents (NOK million) 313.5 665.8

Interest bearing receivables (NOK

million)

96.6 99.9

Unutilised credit facilities (NOK million) 1,800.0 910.0

Average interest rate (per cent) 2.81 2.94

Average interest margin (per cent) 1.33 1.39

Remaining time to maturity for interest-

bearing debt (years)

4.4 4.7

Remaining time to maturity for interest

hedge agreements (years)

6.3 6.7

(Amounts in NOK million)

Long-term Short-term Tota

l

Bonds 9,582.0 1,

889.0 11,471.0

Bank borrowings (loan facilities) 0.6 531.6 532.2

Total interest-bearing debt 9,582.6 2,420.6 12,003.2

Accrued financial items 0.5 1.2 1.6

Total book value interest-bearing debt 9,583.1 2,421.8 12,004.8

Fair value of bonds

1

9,586.2 1,914.5 11,500.7

Fair value of bank borrowings

1

0.6 531.4 532.0

(Amounts in NOK million)

Long-term Short-term Total

Bonds 10,185.0 - 10,185.0

Bank borrowings (loan facilities) 532.2 1,401.5 1,933.7

Total interest-bearing debt 10,717.2 1,401.5 12,118.7

Accrued financial items (16.6) (5.1) (21.6)

Total book value interest-bearing debt 10,700.6 1,396.4 12,097.1

Fair value of bonds

1

10,200.1 - 10,200.1

Fair value of bank borrowings

1

529.8 1,395.8 1,925.6

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 40

2021:

2020:

The maturity structure of the group’s long-term

interest-bearing debt as at 31 December is

specified in the table below (short-term interest-

bearing debt falls due within one year from the

balance-sheet date).

The carrying amount of group assets pledged as

security as at 31 December is specified in the

table below.

1

Properties with a carrying amount of NOK 263.6 million as at 31

December 2021 were not pledged for interest-bearing debt (NOK 97.5

million).

The group had 10 bonds totalling NOK 11,471

million outstanding as at 31 December 2021.

These fall due as follows: NOK 1,889 million in

2022, NOK 400 million in 2023, NOK 2,615 million

in 2024, NOK 1,675 million in 2025, NOK 1,350

million in 2026 and NOK 3,542 million in 2030. All

bonds are secured by properties and are listed on

the Oslo Stock Exchange. None of the bonds have

running terms related to financial covenants. All

the bonds have change of control clauses, and

requirement of a maximum of 65 per cent LTV on

the mortgaged building at the time of borrowing.

Norwegian Property has a NOK 1 billion overdraft

facility with Nordea, SEB and DNB, where

drawings are secured by a portfolio of properties.

In addition, the company has a NOK 530 million

bilateral overdraft facilities with SEB secured by a

mortgage on Snarøyveien 30, a NOK 200 million

bilateral overdraft facilities with DNB secured by a

mortgage on Vinslottet and an overdraft facility

with DNB and SEB of NOK 600 million with a

mortgage on Verkstedhallen at Aker Brygge. The

security is shared with bond holders. The facilities

are subject to annual renewal. The most

important terms for all these facilities are a

minimum interest-rate hedge ratio of 50 per cent,

interest cover of at least 1.4 and a maximum LTV

of 75 per cent. Agreed requirements in the loan

agreements were met at year-end 2021 and 2020,

as well as all quarterly interim reporting dates in

2021 and 2020.

(Amounts in NOK million)

Bank loans Bonds Total

Interest-bearing debt as of 1 January 1,933.7 10,185.0 12,118.7

New debt - 1,697.0 1,697.0

Repayment of debt (1,401.5) (411.0) (1,812.5)

Interest-bearing debt as of 31

December 532.2 11,471.0 12,003.2

Accrued financial items (1.3) 3.0 1.6

Book value of interest-bearing debt 530.8 11,474.0 12,004.8

(Amounts in NOK million)

Bank loans Bonds Total

Interest-bearing debt as of 1 January 2,048.1 6,120.0 8,168.1

New debt 550.0 5,871.0 6,421.0

Repayment of debt (664.4) (1,806.0) (2,470.4)

Interest-bearing debt as of 31

December 1,933.7 10,185.0 12,118.7

Accrued financial items (3.1) (18.6) (21.6)

Book value of interest-bearing debt 1,930.6 10,166.4 12,097.1

(Amounts in NOK million)

2021 2020

Due in 2022 (2021) 2,420.6 1,401.5

Due in 2023 (2022) 400.6 2,831.5

Due in 2024, 2025 and 2026 (2023, 2024

and 2025)

5,640.0 4,193.7

Due after 2026 (after 2025) 3,542.0 3,692.0

Total 12,003.2 12,118.7

(Amounts in NOK million)

2021 2020

Investment property

1

24,909.2 23,352.5

Total 24,909.2 23,352.5

Liabilities secured 12,003.2 12,118.7

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 41

NOTE 16: Deferred tax and income tax

The table below specifies the income tax for the

group on payable and deferred taxes respectively,

and the calculation of income tax expense based

on income before tax.

1

Applies primarily to deferred tax assets related to investment

property, which is not recognised in the balance sheet when the fair

value is greater than the taxable value but lower than the cost for the

group.

Changes for the year to net deferred tax are

specified as follows.

Changes for the year to deferred tax appear as follows:

(Amounts in NOK million) 2021 2020

Payable tax 6.3 -

Deferred tax 415.5 399.7

Income tax 421.8 399.7

Profit before income tax: 1,994.9 2,075.5

Income tax calculated at 22 per

cent 438.9 456.6

Other differences

1

(23.4) (56.9)

Deferred tax 415.5 399.7

Payable tax 6.3 -

Income tax 421.8 399.7

(Amounts in NOK million) 2021 20

20

At 1 January 1,268.0 866.1

Recognised through profit and loss 415.5 399.7

Tax charged to comprehensive

income

2.3 2.2

At 31 December 1,685.8 1

,268.0

(Amounts in NOK million)

Investment

property

1

Gain and

loss

ac

count

Carry

forward

lo

sses

Carry

forward

in

terest

deductions

Financial

derivatives

Other Total

2

Total at 1 January 2020 1,241.7 57

.6 (415.3) (200.7) (16.6) (1.3) 665.4

Not capitalised at 1 January 2020

3

- - - 200.7 - - 200.7

Book value at 1 January 2019 1,241.7 5

7.6 (415.3) - (16.6) (1.3) 866.1

Recognised through profit and loss in 2020 463.9 (

29.8) (11.4) - (22.3) (0.6) 399.7

Recognised through comprehensive income

in 2020

2.2 - - - - - 2.2

Change of calculated deferred tax in 2020 466.0 (29.8) (11.4) - (22.3) (0.6) 401.9

Total at 31 December 2020 1,707.7 27.8 (426.7) (380.3) (38.9) (1.9) 887.7

Not capitalised at 31 December 2020

3

- - - 380.3 - - 380.3

Book value at 31 December 2020 1,707.7 2

7.8 (426.7) - (38.9) (1.9) 1,268.0

Recognised through profit and loss in 2021 373.2 (

3.6) 12.5 - 33.0 0.4 415.5

Recognised through comprehensive income

in 2021

2.3 - - - - - 2.3

Change of calculated deferred tax in 2021 375.5 (

3.6) 12.5 - 33.0 0.4 417.8

Total at 31 December 2021 2,083.2 24.2 (414.2) (380.3) (5.9) (1.5) 1,305.5

Not capitalised at 31 December 2021

3

- - - 380.3 - - 380.3

Book value at 31 December 2021 2,083.2 24.2 (414.2) - (5.9) (1.5) 1,685.8

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 42

1

The tax value totalled NOK 8.3 billion as at 31 December 2021. Theoretical deferred tax in the event that all the properties are sold at fair value

amounts to about NOK 3.4 billion. The difference from estimated deferred tax for investment property reflects the recognition exception in IAS 12.15

for the purchase of assets.

2

Deferred tax assets and liabilities are presented net when the group has a legally enforceable right to offset current tax assets against current tax

liabilities and when the deferred taxes relate to the same taxation authority. All group limited companies are included in the tax group and registered

in Norway.

3

With effect from 2019, amendments were made to the rules on limiting interest deductions under Norwegian tax legislation. The limitation has been

extended to include external interest payments for taxpayers in a group. The change affects Norwegian Property, which has a foreign controlling

shareholder.

NOTE 17: Segment information

Operating segments are reported in a manner

consistent with the internal reporting provided to

the chief operating decision maker. The chief

operating decision maker, who is responsible for

allocating resources and assessing the

performance of the operating segments, has been

identified as the senior management team.

Norwegian Property’s primary business is the

ownership and management of commercial

properties in the Oslo region. From the end of

2018, the company has also had residential units

under construction in Oslo. The project was

completed in 2020. In the third quarter of 2020,

the company made an investment in 42.5 per cent

of the preferred shares in the residential

development company Nordr. The Forusbeen 35

property at Forus in Stavanger was reregulated

from a commercial building to a property with a

combined residential and commercial purpose in

2020. Norwegian Property owned the project as a

joint venture from 31 December 2020.

The segmentation of operating profit, excluding

the administrative owner costs, reflects the

division into commercial property and residential

property segments. A similar division has also

been made for all balance sheet items apart from

those related to group functions, financing of the

group and tax positions.

Segment information related to the income statement items for 2021 is specified in the table below.

(Amounts in NOK million)

Commercial

properties

Residential

properties

Group Total

Revenue 919.6 - - 919.6

Project cost from the sale of residential properties - - - -

Total property-related expenses (124.4) - - (124.4)

Administrative expenses - - (59.2) (59.2)

Share of profit in joint ventures (0.4) 75.3 - 74.9

Change in market value of investment property 1,365.0 - - 1,365.0

Operating profit 2,159.7 75.3 (59.2) 2,175.8

Net financial items (180.9) (180.9)

Profit before income tax (240.1) 1,994.9

Income tax (421.8) (421.8)

Profit for the period (661.9) 1,573.1

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 43

Segment information related to income statement items for 2020 is specified in the table below.

Segment information related to balance-sheet items as at 31 December 2021 is specified in the table below.

Segment information related to balance-sheet items as at 31 December 2020 is specified in the table below.

NOTE 18: Contractual rental income

Norwegian Property’s operating income in 2021

totalled NOK 919.6 million (NOK 1,564.5 million).

18.1 - Commercial property

The group’s commercial properties are located in

the Oslo region. They primarily consist of office

premises with associated warehousing and

parking space. Some of the properties include

space for letting as retail outlets and restaurants.

Offices account for the bulk of all the larger

properties. At Aker Brygge in central Oslo, the

properties are located by the sea with a small

associated marina business and an energy centre

(Amounts in NOK million)

Commercial

properties

Residential

properties

Group Total

Revenue 708.6 85

5.9 - 1,564.5

Project cost from the sale of residential properties - (8

00.4) - (800.4)

Total property-related expenses (107.2) 0.

5 - (106.7)

Administrative expenses - - (

46.8) (46.8)

Share of profit in joint ventures 4.5 (4

.9) - (0.4)

Change in market value of investment property 1,827.5 - -

1,827.5

Operating profit 2,433.4 51

.2 (46.8) 2,437.8

Net financial items (362.2) (3

62.2)

Profit before income tax (409.0) 2,

075.6

Income tax (399.7) (3

99.7)

Profit for the period (808.7) 1,

675.9

(Amounts in NOK million)

Commercial

properties

Residential

properties

Group Total

Investment property 24,908.0 - - 24,908.0

Other fixed assets 32.6 - 2

.8 35.4

Investment in joint ventures - 1,084.8 - 1,084.8

Receivables 421.7 - - 421.7

Cash and cash equivalents - - 313.5 313.5

Deferred tax - - (

1,685.8) (1,685.8)

Financial derivative instruments - - (26.9) (26.9)

Interest bearing liabilities - - (

12,004.8) (12,004.8)

Other liabilities (110.9) - (

98.4) (209.3)

Total equity (12,836.6) (1

2,836.6)

(Amounts in NOK million)

Commercial

properties

Residential

properties

Group Total

Investment property 23,185.2 - - 23,185.2

Other fixed assets 35.8 - 2

.0 37.8

Investment in joint ventures - 1,013.6 - 1,013.6

Receivables 458.8 - 1.9 460.6

Cash and cash equivalents - - 665.8 665.8

Deferred tax - - (

1,268.0) (1,268.0)

Financial derivative instruments - - (177.0) (177.0)

Interest bearing liabilities - - (12,097.1) (12,097.1)

Other liabilities (169.6) (1.0) (89.5) (260.0)

Total equity (11,560.9) (1

1,560.9)

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 44

which uses seawater for heating/cooling of the

properties.

Tenants comprise commercial companies and

public-sector institutions of different types and

sizes. Rental income is based on leases of varying

lengths, where income based on the leases is

recognised on a linear basis over the duration of

the lease. Rental income is generally invoiced

quarterly in advance with 30 days to pay. Income

from the marina relates to rental charges by the

season, by the day, for events etc. Income for the

energy centre is invoiced to the tenants who are

connected to it.

The group’s lease-based rental income is

distributed as follows, where the figures are given

as lease values without index adjustment for

leases entered into as at 31 December.

Service charges are recognised net as an agent of

the tenant. Therefore, the operating revenues

does not include service charges invoiced to the

tenants. Accrued service charges are recognised in

the balance sheet together with payments on

account from tenants-, and, therefore, do not

affect profit beyond an administrative mark-up

recognised as income. The settlement of service

charges is made after the balance-sheet date.

Service charges invoiced to tenants in 2021

amounted to NOK 124 million, and the

administrative mark-up recognised as income

amounted to NOK 6.2 million.

18.2 - Residential property

In the period from 2018 to 2020, the group had a

project comprising 223 residential units under

development at Hasle in Oslo. All the units were

delivered to end users in 2019 and 2020. Sales

income from units in 2020 came to NOK 855.9

million. The total sales value of the 223 residential

units at Hasle was NOK 1,238.8 million.

NOTE 19: Net realised financial items

The table below presents a specification of the

income statement item on realised net financial

items.

NOTE 20: Operating expenses

A specification of the operating expenses in the

income statement is provided below.

20.1 - Property-related operational expenses

Property-related expenses include the

administrative costs related to the management

of the properties as well as the operating and

maintenance costs.

20.2 - Other property-related expenses

Other property-related expenses include income-

related costs related to leasing, marketing etc.,

the owner’s share of service charges, project-

related property costs and depreciation related to

the properties.

(Amounts in NOK million) 2021 2020

Within 1 year 1,034.9 961.2

Between 1 and 2 years 956.6 903.7

Between 2 and 3 years 861.9 817.9

Between 3 and 4 years 625.8 728.9

Between 4 and 5 years 510.1 530.6

Later than 5 years 2,518.1 2,891.3

Total 6,507.4 6,833.5

(Amounts in NOK million) 2021 2020

Interest income on bank deposits and

receivables

7.1 3.5

Interest income on guarantee

receivables

7.9 0.7

Total financial income

15.0 4.2

Interest expense on borrowings

(346.0) (26

4.8)

Total financial expenses

(346.0) (26

4.8)

Net interest expense and realised

interest derivatives

(331.1) (260.6)

(Amounts in NOK million) 2021 2020

Administrative management costs 11.4 10.2

Operating and maintenance costs 52.9 41.4

Total property-related operational

expenses

64.3 51.6

(Amounts in NOK million) 2021 2020

Rental, market and other income-

related expenses

28.0 25.0

Owner's share of service charge

expenses

32.1 30.1

Total other property-related expenses 60.1 55.1

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 45

20.3 - Administrative owner expenses

Administrative expenses relate to costs which are

not directly related to the operation and leasing

of properties, and include the costs related to the

overall ownership and corporate functions.

NOTE 21: Payroll costs and remuneration of

executive officers and auditor

The tables below present a breakdown of payroll

costs and remuneration of directors, senior

executives and auditors.

21.1 - Payroll costs

Payroll costs for the year are as follows.

Pursuant to the Norwegian Act on Mandatory

Occupational Pensions, Norwegian Property ASA

is required to operate certain pension plans. The

group has plans which satisfy these requirements

(defined contribution plan for all employees).

The group has a controlling interest in Bryggedrift

AS (see note 28), which has an individual defined

benefit pension obligation of NOK 2 million to a

former employee funded from operations.

21.2 - Directors’ fees

Fees to directors in 2021 are presented in the

table below.

1

Reported benefits paid in 2021 (amounts in NOK). In addition to that

are the employer’s National Insurance contributions (14.1 per cent).

2

Amount expensed in the accounts for 2021. See note 22.4 for

information about the options exercised in 2021.

Fees to directors in 2020 are presented in the

table below.

1

Reported benefits paid in 2020 (amounts in NOK). In addition to that

are the employer’s National Insurance contributions (14.1 per cent).

2

Amount expensed in the accounts for 2020. No options have been

exercised in 2020.

21.3 - Auditor’s fee

Fees paid to the company's elected auditor

1

are

shown in the table below.

1

Fees to PricewaterhouseCoopers AS (PwC) and collaborating

companies. The fees are net of VAT (amounts in NOK).

(Amounts in NOK million) 2021 2020

Payroll expenses (see note 21) 81.2 76.5

Depreciation 2.1 2.3

Other operating expenses 22.7 9.2

Costs allocated to property costs (46.7) (41.2)

Total administrative expenses 59.2 46.8

(Amounts in NOK million) 2021 2020

Salaries and remuneration 72.6 61.3

Employee share-option scheme (see

note 22.4)

0.7 2.2

Social security costs 12.9 9.1

Pension costs for defined

contribution plans

2.7 2.8

Other employee expenses 1.6 1.1

Total payroll cost

90.5 76.5

Number of employees at 31

December

61 51

Number of full-time equivalent

positions in the financial year

61 57

Average number of employees in the

financial year

56 49

Name

Remune-

ration

1

Share

based

pa

yment

expense

2

700,000 -

450,000 -

250,000 -

250,000 20,922

250,000 -

Total

2,400,000 20,922

Merete Haugli, chair 01.01-31.12

Bjørn Henningsen, deputy chair 01.01-31.12

Cecilie Astrup Fredriksen, director 01.01-31.12

Carl Erik Krefting, director 01.01-31.12

Kathrine Astrup Fredriksen, director 01.01-31.12

Anders Buchardt, director 01.01-31.12

Lars Erich Nilsen, director 01.01-31.12

Name

Remune-

ration

1

Share

based

pa

yment

expense

2

700,000 -

450,000 -

250,000 -

250,000 120,984

250,000 -

187,500 -

Total

2,337,500 120,984

Merete Haugli, chair 01.01-31.12

Bjørn Henningsen, deputy chair 01.01-31.12

Cecilie Astrup Fredriksen, director 01.01-31.12

Anders Buchardt, director 16.04-31.12

Kathrine Astrup Fredriksen, director 01.01-31.12

Carl Erik Krefting, director 01.01-31.12

Lars Erich Nilsen, director 01.01-31.12

Type of fees 2021 2020

Statutory audit 1,441,000 1,157,000

Other certification services 42,000 55,000

Tax/VAT advice 508,000 712,000

Other services 3,873,000 -

Total 5,864,000 1,924,000

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 46

21.4 - Remuneration of senior management

Remuneration of senior management in 2021 is specified in the table below.

1

Reported pay for services in 2021 (amounts in NOK). In addition to that are the employer’s National Insurance contributions (14.1 per cent).

2

Amount expensed in the accounts for 2021. No options have been exercised in 2021.

3

Contribution paid to defined contribution pension plans and employee insurance in 2021 (amounts in NOK).

4

Started 31 October 2021.

Remuneration of senior management in 2020 is specified in the table below:

1

Reported pay for services in 2020 (amounts in NOK). In addition to that are the employer’s National Insurance contributions (14.1 per cent).

2

Amount expensed in the accounts for 2020. No options have been exercised in 2020.

3

Contribution paid to defined contribution pension plans and employee insurance in 2020 (amounts in NOK).

4

Started 1 January 2020.

NOTE 22: Share capital and shareholders

The table below specifies the average number of

shares in the past two years, the group’s largest

shareholders and the shares owned by the

directors and senior executives as at 31

December.

22.1 - Changes in share capital and average

number of shares

22.2 - The group’s main shareholders at 31

December

As at 31 December 2021, the company has a share

capital of NOK 324,912,798 divided into

649,825,596 shares, each with a par value of NOK

0.50. The company owns 6,250,000 treasury

shares. Geveran Trading Co. Ltd. owns the

remaining 643,575,596 shares in the company.

Name

Title Salary

1

Bonuses

1

Share based

payment

expense

2

Other

benefits

1

Pension/

insurance

benefits

3

Bent Oustad CEO 3,915,188 2,625,000 703,344 4,392 94,128

Haavard Rønning CFO 2,657,422 1,297,500 - 7,831 93,883

Bjørge Aarvold EVP property management 1,916,644 561,000 - 124,392 104,165

Ellen Cathrine Kobro EVP sales and marketing 2,132,951 630,000 - 7,392 93,198

Sindre Kornrud EVP projects 1,775,167 534,000 - 4,392 92,757

Thomas Weeden

4

EVP business development and strategy 487,500 - - 1,098 24,464

Total 12,884,872 5,647,500 703,344 149,497 502,595

Name

Title Salary

1

Bonuses

1

Share based

payment

ex

pense

2

Other

benefits

1

Pension/

insurance

bene

fits

3

Bent Oustad CEO 3,783,135 2,625,000 1,645,668 4,392 86,718

Haavard Rønning CFO 2,601,248 1,275,000 - 16,541 86,434

Bjørge Aarvold EVP property management 1,875,627 440,640 - 141,456 97,892

Ellen Cathrine Kobro EVP sales and marketing 1,975,863 550,800 - 19,324 86,767

Sindre Kornrud

4

EVP projects 1,662,323 - - 15,286 74,243

Total 11,898,196 4,

891,440 1,645,668 196,999 432,054

2021 2020

Average number of shares

(1 000 shares)

649,826 541,750

Number of shares issued at

31 December (1 000

sha

res)

649,826 649,826

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 47

In July 2021, Geveran Trading Co. Ltd. (Geveran)

acquired shares equalling more than 90 per cent

of the shares in Norwegian Property ASA. In

August 2021, Geveran carried out a compulsory

acquisition of all the remaining shares and the

shares in Norwegian Property ASA was delisted

from the Oslo Stock Exchange.

The compulsory acquisition included the following

shareholdings for senior executives and directors:

- 130,313 shares owned by Max Eiendom

AS and 275,686 shares owned by

Camvecti Holding AS, where both

companies are wholly owned by the

deputy chair Bjørn Henningsen.

- 356,664 shares and a TRS agreement

relating to 4,262,801 shares owned by

Carucel Holding AS, which is a wholly

owned company of the director Carl Erik

Krefting.

- 55,000 shares owned by Yanka AS, which

is a wholly owned company of the CEO

Bent Oustad.

As at 31 December 2020, the group’s largest

shareholders were as follows:

22.3 - Shares held by senior executives and

directors as at 31 December 2021

The directors Cecilie Astrup Fredriksen, Kathrine

Astrup Fredriksen and Lars Erich Nilsen are related

to Geveran Trading Co Ltd, which is the company’s

sole proprietor as at 31 December 2021.

22.4 - Share options

Share options had been granted to the CEO and

the director Carl Erik Krefting. Each share option

entitles the holder to subscribe for a share in

Norwegian Property ASA.

Largest shareholders

Type of

account

Country

Number of

shares

Percen-

tage

GEVERAN TRADING CO LTD ORD CYP 5

21,840,723 80.30

FOLKETRYGDFONDET ORD NOR 95,766,570 14.74

NORWEGIAN PROPERTY ASA ORD NOR 6,250,000 0.96

DANSKE BANK AS ORD DNK 4,262,801 0.66

BANAN II AS ORD NOR 1

,596,000 0.25

SANDEN AS ORD NOR 1,584,078 0.24

PACTUM AS ORD NOR 1

,022,213 0.16

SKANDINAVISKA ENSKILDA

BANKEN AB

NOM FIN 884,883 0.14

KAS BANK N.V. NOM NLD 8

11,156 0.12

MORGAN STANLEY & CO.

INTERNATIONAL

ORD GBR 767,151 0.12

SKANDINAVISKA ENSKILDA

BANKEN AB

NOM FIN 697,296 0.11

J.P. MORGAN BANK

LUXEMBOURG S.A.

NOM LUX 487,105 0.07

SELSA AS ORD NOR 357,605 0.06

CARUCEL INVEST AS ORD NOR 356,664 0.05

ECKHOFF HOLDING AS ORD NOR 346,090 0.05

BANQUE DE LUXEMBOURG S.A. NOM LUX 342,203 0.05

FUNDER ORD NOR 296,000 0.05

AVANZA BANK AB NOM SWE 2

91,143 0.04

J.P. MORGAN BANK

LUXEMBOURG S.A.

NOM SWE 284,244 0.04

CAMVECTI HOLDING AS ORD NOR 275,686 0.04

OTHER 11,305,985 1.74

Total number of shares at 31

December 2020

649,825,596 100.00

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 48

The fair value of the options is calculated at the

time of allocation and expensed over the vesting

period. The following amount has been

recognised against equity in relation to employee

options as at 31 December.

The option agreement with the CEO was entered

into in 2017 and entitles him to subscribe for a

total of 5,750,000 shares as follows.

The options will lapse if they are not exercised by

1 July 2022. As an alternative to delivering shares,

the board of Norwegian Property may opt to

settle the profit in cash. The agreement otherwise

contains normal conditions on such matters as

continued employment and adjustment of share

prices and so forth as a result of corporate events.

The total fair value of share options granted in

2017 was NOK 11.2 million (excluding the

employer’s National Insurance contribution). The

fair value is calculated by external valuers based

on the Black-Scholes model. In calculating fair

value, volatility in the period was set at 27.43 per

cent and the risk-free interest rate at 0.97 per

cent. The share price at the grant date was NOK

10.45.

The option agreement with the director was

entered into in 2018 and entitled him to subscribe

for a total of 500,000 shares as follows.

The options were exercised in the third quarter of

2021. The NOK 3.8 million profit was settled in

cash.

22.5 - Revaluation reserve

A revaluation reserve of NOK 37.2 million (net

profit) related to owner occupied property is

included in retained earnings at 31 December

2021.

NOTE 23: Earnings per share

Basic earnings per share are calculated by dividing

the net profit attributable to shareholders with

the weighted average number of ordinary shares

outstanding during the year.

1

At 31 December 2021, the group owned 6,250,000 treasury shares.

2

The diluted number of shares at 31 December 2021 has been

adjusted for options granted.

Employee options

Number of

options

Weighted

average

excercise

price (NOK)

Outstanding 1 January 2020 6,250,000 12.46

Awarded - -

Exercised - -

Terminated - -

Outstanding 31 December 2020 6,250,000 12.46

Earned 1 January 2021 4,083,333 11.50

Outstanding 1 January 2021 6,250,000 12.46

Awarded - -

Exercised -500,000 11.50

Terminated - -

Outstanding 31 December 2021 5,750,000 12.54

Earned 1 January 2022 5,750,000 12.54

Employee options 2021 2020

Recognised against equity at 1

January

11.4 9.6

Recognised in profit and loss during

the period

0.7 1.8

Recognised against equity at 31

December

12.1 11.4

Earliest exercise date No. of shares Subscr. price (NOK)

01.01.2019 1,000,000 10.00

01.01.2020 1,250,000 11.50

01.01.2021 1,500,000 12.50

01.01.2022 2,000,000 14.50

Earliest exercise date No. of shares Subscr. price (NOK)

19.04.2019 166,666 11.50

19.04.2020 166,667 11.50

19.04.2021 166,667 11.50

2021 2020

Net profit attributable to shareholders

(NOK million)

1,573.1 1,675.9

Weighted average number of

outstanding shares, exclusive treasury

shares (million shares)

1

643.6 535.5

Weighted average number of diluted

outstanding shares, exclusive treasury

shares (million shares)

2

647.1 541.7

Basic earnings per share (NOK per

share)

2.44 3.13

Diluted earnings per share (NOK per

share)

2.43 3.09

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 49

NOTE 24: Dividend per share and dividend

policy

Norwegian Property’s goal is to pay a dividend to

its shareholders amounting to 30-50 per cent of

its ordinary profit after tax payable, but before

fair-value adjustments. The dividend can be

higher in times with good cash flow. Before a

dividend is determined, an assessment is made of

the group’s financial position and prospects,

including the availability of attractive investment

opportunities.

The board has a mandate from the group’s AGM

to make quarterly dividend payments. A dividend

of NOK 0.425 per share was approved by the

board meeting on 4 February 2022.

NOTE 25: Related-party disclosures

Parties are related if one party can exercise

significant influence over the group in making

strategic or operating decisions. Significant

influence is normally obtained by ownership,

participation in decision-making bodies and

management, or by agreements.

Balances and transactions with subsidiaries (which

are related parties of Norwegian Property ASA)

are eliminated in the consolidated financial

statements and are not covered by the

information given in this note. Financial

relationships related to the board and senior

management are described in notes 21 and 22.

A management fee of NOK 2.4 million has been

expensed in 2021 from a company related to the

shareholder Geveran Trading Co. Ltd.

No other agreements or significant transactions

with related parties were carried out in 2021.

NOTE 26: Contingent liabilities and assets

The group has a liability if it is committed to giving

up financial resources to another party at a future

date. An uncertain liability is a liability of

uncertain timing or amount. A contingent liability

is a category of uncertain liabilities, where the

possible obligation depends on whether some

uncertain future events occur which the group

cannot fully influence. Similarly, a contingent

asset relates to the possible rights for the group to

receive financial resources at a future date.

Guarantees relating to the sale of properties and

companies

The seller normally issues guarantees relating to

the sale of properties because of formal, physical

and suchlike conditions related to the transferred

properties and/or companies. The guarantees

typically include conditions related to legal status,

ownership of shares, validity of financial

statements and tax issues, contractual issues,

liens, environmental matters, insurance coverage,

assessment of defects etc. The seller must

typically cover the financial losses incurred by the

buyer from any errors or omissions which may be

linked to the guarantees.

Norwegian Property has issued this kind of

guarantee to buyers in relation to the sale of

properties/companies since the group was

established. As at 31 December 2021, the

assessment is that there are no circumstances

which entail an obligation for Norwegian Property

and a need to make provisions.

NOTE 27: Events after the balance-sheet date

Events after the balance-sheet date are events,

favourable or unfavourable, which occur between

the balance-sheet date and the date when the

financial statements are authorised for issue. Such

events can be events which provide information

on conditions existing at the balance-sheet date,

resulting in adjustments to the financial

statements, or events which do not require such

adjustments.

Annual report 2021 - Norwegian Property ASA

Annual group accounts Page 50

In accordance with the mandate from the AGM in

2021, the board decided on 4 February 2022 that

a dividend of NOK 0.425 per share will be paid for

2021.

No other significant events have occurred after 31

December 2021 which provide information on the

conditions existing at the balance-sheet date.

NOTE 28: Group companies

The consolidated financial statements of

Norwegian Property ASA comprise the following

wholly-owned subsidiaries as at 31 December

2020:

Aker Brygge AS

Aker Brygge Business Village AS

Aker Brygge Energisentral AS

Aker Brygge Marina AS

Aker Brygge Marina Drift AS

Aker Brygge Uteareal AS

Bryggetorget Invest AS

Bryggetorget 3 AS

Bydel Aker Brygge Forvaltning AS

Dokkbygningen Aker Brygge AS

Drammensveien 60 AS

Fondbygget AS

Forusbeen 35 AS

Gardermoen Næringseiendom ANS

Gardermoen Næringseiendom AS

Gardermoen Næringseiendom KS

Gjerdrums vei 10 D AS

Gjerdrums vei 5 AS

Gjerdrums vei 8 AS

Gjerdrums vei 14-16 AS

Gjerdrums vei 17 AS

Gjerdrums vei 3 AS

Grensen Investment AS

Gullhaug Torg 3 AS

Gullhaugveien 9-13 AS

Hasle Linje Bygg 01 AS

Nye Hasle Linje Bygg 01 Næring AS

Kaibygning 1 AS

Kaibygning 2 AS

Lille Grensen 7 Andel AS

Lille Grensen 7 ANS

Lille Grensen 7 AS

Norwegian Property ASA

Npro 1 AS

Npro 2 AS

NPRO Drift AS

NPRO Holding AS

NPRO Invest AS

Nydalsveien 15-17 AS

Sandakerveien 130 AS

Snarøyveien 30 AS

Snarøyveien 36 AS

Stranden AS

Støperiet AS

Terminalbygget Aker Brygge AS

Tingvalla AS

Verkstedhallene AS

All subsidiaries have the same business address as

Norwegian Property ASA (Støperigata 2, NO-0250

Oslo, Norway).

In addition to its wholly-owned subsidiaries, the

Norwegian Property group has a controlling

interest in Bryggedrift AS (business address

Støperigata 1, NO-0250 Oslo, Norway), which is

responsible for certain operating services and

management of condominiums at Aker Brygge in

Oslo. Bryggedrift AS is a facility management

company without significant assets. All

condominiums at Aker Brygge are shareholders in

Bryggedrift AS, and Norwegian Property as a

participant in the condominiums had a controlling

interest in Bryggedrift AS as at 31 December 2021

on the basis of the ownership structure of the

condominiums. Norwegian Property is

represented on the board of Bryggedrift AS by

two of the five directors.

Norwegian Property owns Nordr together with

Fredensborg and Union Real Estate Fund III. While

Norwegian Property and Fredensborg are equal

partners, each holding 42.5 per cent of the

preferred shares, Union owns 15 per cent of the

preferred shares (see note 8).

Norwegian Property also owns a 50 per cent share

in the property at Forusbeen 35 together with

Base Bolig (see note 8).

Annual report 2021 - Norwegian Property ASA

Annual accounts of the parent company Page 51

Annual accounts of the parent company

Income statement 1 Jan-31 Dec

(Amounts in NOK million) Note 2021 2020

Management and service fee from group companies 13 50.9 45.6

Total operating revenue 50.9 45.6

Payroll costs 10 (81.2) (73.2)

Depreciation 5 (0.8) (1.0)

Other operating costs 10 (25.5) (24.2)

Total operating costs (107.5) (98.4)

Operating profit (56.6) (52.8)

Financial income 11, 13 460.8 8.4

Financial expenses 11, 13 (369.7) (332.1)

Net financial items 91.1 (323.7)

Profit before tax 34.5 (376.5)

Income tax expense 12 (87.4) 75.7

Profit for the year (52.9) (300.8)

Proposed allocations:

Dividend distribution to shareholders (273.5) (64.4)

Transferred to/from other equity (30.1) (365.2)

Transferred to/from share premium (296.3) -

Annual report 2021 - Norwegian Property ASA

Annual accounts of the parent company Page 52

Balance sheet as at 31 Dec

Oslo, 24 March 2022

Norwegian Property ASA

(Amounts in NOK million) Note 2021 2020

ASSETS

Non-current assets:

Deferred tax assets 12 423.1 541.6

Financial derivative instruments 9 16.5 25.5

Tangible assets 5 2.8 2.0

Investments in subsidiaries 4, 13 4,986.8 4,665.4

Total non-current assets 5,429.1 5,234.6

Current assets:

Financial derivative instruments 9 0.8 -

Intercompany balances 13 9,720.8 10,149.5

Other receivables 2.9 1.9

Cash and cash equivalents 3 290.9 624.2

Total current assets 10,015.4 10,775.6

TOTAL ASSETS 15,444.5 16,010.2

EQUITY AND LIABILITIES

Equity:

Share capital 321.8 321.8

Share premium 2,698.7 3,204.8

Other paid-in equity 0.0 33.2

Total equity 6 3,020.5 3,559.8

Non-current liabilities:

Financial derivative instruments 9 36.2 199.8

Interest-bearing debt 8 9,582.5 10,698.4

Other long-term debt 0.2 0.5

Total non-current liabilities 9,618.9 10,898.7

Current liabilities:

Financial derivative instruments 9 7.9 2.8

Interest-bearing debt 8 2,420.2 1,394.9

Provision for dividend 6 273.5 64.4

Other current liabilities 7 103.4 89.5

Total current liabilities 2,805.1 1,551.6

Total liabilities 12,423.9 12,450.3

TOTAL EQUITY AND LIABILITIES 15,444.5 16,010.2

Annual report 2021 - Norwegian Property ASA

Annual accounts of the parent company Page 53

Cash flow statement 1 Jan-31 Dec

(Amounts in NOK million) Note 2021 2020

Ordinary profit before tax 34.5 (376.5)

Paid taxes 12 (3.2) -

Net financial items 11 (91.1) 323.7

Interest received 11 310.6 8.4

Other financial income received 11 0.1 -

Interest paid 11 (343.4) (214.1)

Other financial expenses paid 11 (19.9) (9.4)

Depreciation of tangible assets 5 0.8 1.0

Changes in other current items 30.1 (5.8)

Net cash flow from operating activities (81.5) (272.6)

Purchase of tangible assets 5 (1.5) (1.7)

Investments in subsidiaries 4 - (0.1)

Repayment of intercompany balances 13 141.8 (5,595.8)

Net cash flow from investment activities 140.3 (5,597.7)

Repayment of interest-bearing debt 8 (1,811.0) (1,806.0)

New interest-bearing debt 8 1,697.0 6,421.0

Dividends paid 6 (273.5) (34.6)

Share issue 6 (0.7) 1,677.6

Other financing activities 6 (3.8) -

Net cash flow from financing activities (392.0) 6,258.1

Net change in cash and cash equivalents (333.3) 387.8

Cash and cash equivalents 1 January 3 624.2 236.4

Cash and cash equivalents 31 December 3 290.9 624.2

Annual report 2021 - Norwegian Property ASA

Annual accounts of the parent company Page 54

NOTE 1: General information

The Norwegian Property ASA real estate group

primarily owns commercial properties in the Oslo

region. Norwegian Property also owns a share

(joint venture) in the residential development

company Nordr. In Stavanger, Norwegian

Property has a joint venture for the development

of a property with a combined residential and

commercial purpose.

The holding company,

Norwegian Property ASA,

is

a public limited company with its headquarters at

Støperigata 2, Oslo (Norway).

Th

e financial statements were adopted by the

board on 24 March 2022 for final approval by the

AGM on 22 April 2022.

NOTE 2: Summary of significant accounting

policies

The financial statements are prepared in

accordance with the Norwegian Accounting Act

and Norwegian generally accepted accounting

principles.

The principal accounting policies applied in the

preparation of these financial statements are set

out below. These policies have been consistently

applied to all the years presented, unless

otherwise stated.

2.1 - Classifications

Assets held for sale or for use in the ordinary

business cycle, or owned mainly for trade, or

expected to be realised within 12 months, or

representing cash and cash equivalents are

classified as current assets. All other assets are

classified as non-current assets. Liabilities which

are expected to be settled in the ordinary course

of business, are mainly held for trade or are

expected to be settled within 12 months are

classified as current liabilities. All other liabilities

are classified as non-current liabilities.

2.2 - Subsidiaries

The cost method is applied to investments in

other companies. The cost price is increased when

funds are added through capital increases or

when group contributions are made to

subsidiaries. Dividends received are initially taken

to income. Dividends exceeding the portion of

retained equity after the purchase are reflected as

a reduction in purchase cost. Dividend/group

contribution from subsidiaries are reflected in the

same year as the subsidiary makes a provision for

the amount. Dividends from other companies are

reflected as financial income when it has been

approved.

2.3 - Tangible assets

Impairment tests are carried out if there is an

indication that the carrying amount of an asset

exceeds the estimated recoverable amount. The

test is performed on the lowest level of fixed

assets at which independent cashflows can be

identified. If the carrying amount is higher than

both the fair value less cost to sell and value in

use (net present value of future use/ownership),

the asset is written down to the highest of fair

value less the cost to sell and the value in use.

2.4 - Trade receivables

Trade receivables and other receivables are

recognised initially at par, less provision for

impairment. Provision for impairment of trade

receivables is based on individual assessments of

each receivable.

2.5 - Cash and cash equivalents

Cash and cash equivalents include cash in hand,

bank deposits, other current highly liquid

investments with original maturities of three

months or less, and bank overdrafts. Bank

overdrafts are shown under borrowings in current

liabilities in the balance sheet.

2.6 - Share capital, share premium and share

options

Shares are classified as equity when there is no

obligation to transfer cash or other assets. Costs

directly attributable to the issue of new shares or

options are shown in equity as a deduction, net of

tax, from the proceeds. Treasury shares are

recognised at par.

Annual report 2021 - Norwegian Property ASA

Annual accounts of the parent company Page 55

Employee options represent rights for employees

to subscribe for shares in the company at a future

time at a predetermined subscription price

(subscription right). Drawing requires continued

employment. The fair value of employee benefits

received in exchange for the granting of options is

recognised as an expense. The total amount to be

expensed over the vesting period reflects the fair

value of the options granted. On the balance-

sheet date, the company revises the estimates of

the number of options expected to be utilised and

changes in estimates are recognised in the income

statement over the remaining vesting period with

a corresponding adjustment of equity. The value

of allotted shares after the deduction of directly-

linked transaction costs is credited to share capital

and share premium reserve when exercisable

options are exercised.

2.7 - Borrowings

Borrowings are recognised initially at fair value,

net of the transaction costs incurred. Borrowings

are subsequently stated at amortised cost using

the effective interest method. Any differences

between the proceeds (net of transaction costs)

and the redemption value are recognised in the

income statement over the duration of the

borrowings.

2.8 - Interest expense

Interest expenses on borrowings are recognised

under the financial costs in the income statement

using the effective interest-rate method. This

method is used to allocate amortised cost on

financial assets and financial liabilities and for the

correct accrual of interest income and interest

expense. The effective interest rate allocates

future cash flows throughout the duration of the

loan and indicates the real net value of the

financial asset or liability.

When calculating the effective interest rate, the

group estimates all contractual cash flows related

to the financial instrument (such as terms of

payment) but does not take future loss into

account. When calculating the effective interest

rate, all fees are included and distributed over the

relevant period (term to maturity).

2.9 - Management fees and other operating

revenue

Management fees charged to subsidiaries relate

to property management, managing customer

centres and financial management. Management

fees are recognised when they are earned.

2.10 - Derivatives

The group is exposed to interest-rate risk related

to floating rate loans. The company uses forward

rate agreements to reduce interest-rate risk.

Unrealised profits/losses related to these

contracts are recognised in the income statement.

2.11 - Pensions

Norwegian Property ASA operates a defined

contribution plan for all employees. A defined

contribution pension plan is a scheme where the

group pays fixed (defined) amounts to a separate

legal entity. The group has no legal or other

obligations to pay further amounts if the entity

has insufficient assets to make all the payments

due to employees under rights earned in current

or previous periods. Contributions are recognised

as an employee benefit expense when they fall

due. Prepaid contributions are recognised as an

asset to the extent that cash refunds or

reductions in future payments are available.

2.12 - Income tax

Tax in the income statement consists of tax

payable and changes in deferred tax. Deferred

income tax is calculated at the applicable rate

based on the temporary differences between the

tax bases of assets and liabilities as well as their

carrying amounts in the consolidated financial

statements and the tax loss carried forward as at

31 December. Tax increasing or reducing

temporary differences which are reversed or can

be reversed in the same period are offset.

Deferred tax assets are recognised to the extent

that it is probable that future taxable profit will be

available against which the temporary differences

can be utilised.

2.13 - Use of estimates

The preparation of the income statement in

accordance with the generally accepted

Norwegian accounting principles requires the use

Annual report 2021 - Norwegian Property ASA

Annual accounts of the parent company Page 56

of estimates and assumptions which affect the

income statement and the valuation of assets and

liabilities as well as information related to

contingent assets and liabilities at the balance-

sheet date.

Contingent losses which are probable and

quantifiable are recognised as they occur.

2.14 - Cash flow statement

The preparation of the cash flow statement is

based on the indirect method.

NOTE 3: Financial risk management

The company’s activities imply exposure to a

variety of financial risks: market, credit and

liquidity.

3.1 - Market risk

Market risk for the company is primarily related to

the interest-rate risk. The company’s revenues

relate entirely to management fees from

subsidiaries.

The company is exposed to interest-rate risk

related to floating rate loans. To manage interest-

rate risk, the group has entered into interest-rate

swap agreements. Notional principal amounts and

the maturity structure for the company’s overall

portfolio of interest-rate hedges as at 31

December are specified in NOK million in the table

below.

3.2 - Credit risk

The company’s receivables relate mainly to

intercompany balances, where credit risk is

considered low.

3.3 - Liquidity risk

The company aims to ensure that liquidity/credit

facilities are sufficient to meet its foreseeable

obligations. In addition, it will have a reasonable

capacity to meet unforeseen obligations. One goal

is that the liquidity reserve should consist as far as

possible of available revolving credit and overdraft

facilities, rather than cash and cash equivalents.

The company’s liquidity reserve as at 31

December is specified in the table below.

1

Subsidiaries’ deposits in the parent company’s group cash pool

system are included as cash and cash equivalents in Norwegian

Property ASA.

As described hereinabove, the company has a

high level of hedging against changes in market

interest rates, reducing the need for liquidity

reserves to meet unforeseen obligations related

to these areas. Liquidity risk relates primarily to

servicing instalments on and maturity of liabilities.

The table below specifies the company’s liabilities

in accordance with the maturity structure. The

classification is based on the timing of maturities

specified in the contracts. The amounts in the

table specify the timing of repayments of notional

principal amounts (NOK million).

2021

1

:

Year 2021 2020

< 1 year (1,220.0) (900.0)

1-2 year (500.0) (1,220.0)

3-5 year (1,650.0) (1,950.0)

Over 5 year (1,800.0) (2,000.0)

Notional principal amount (5,170.0) (6,070.0)

(Amounts in NOK million) 2021 2020

The company's own accounts and net

balance in the group accounts

6,355.0 6,794.5

Intercompany net balance in the

group accounts

1

(6,064.1) (6,170.3)

Cash and cash equivalents 290.9 624.2

Restricted bank deposits (2.7) (2.3)

Available cash and cash equivalents 288.2 62

1.9

Unused credit and overdraft facilities 1,800.0 91

0.0

Liquidity reserve 2,088.2 1,531.9

(Amounts in NOK million)

Interest-

bearing

debt

Other

liabilities

< 1 yea r 2,736.3 103.4

1-2 year 675.8

3-5 year 6,163.9

Over 5 year 3,906.5

Expected cash flow 13,482.5 103.4

Book value 12,002.6 103.4

Annual report 2021 - Norwegian Property ASA

Annual accounts of the parent company Page 57

2020

1

:

1

The difference between carrying amount and expected cash flow

reflects capitalised and estimated interest cost based on the average

interest rate as at 31 December. The difference between carrying

amount and expected cash flow for other liabilities relates to

provision for hedge contracts.

NOTE 4: Investments in subsidiaries

Investments in subsidiaries as at 31 December

2021 are specified in the table below. The

companies own the group’s properties (single-

purpose entities).

1

Voting ownership interest is identical to ordinary ownership.

Changes in the book value for the year are as

follows.

NOTE 5: Tangible assets

Changes in tangible assets are specified in the

table below.

The company uses linear depreciation. The

economic life of the assets is four years for IT

equipment, five years for licences, cars and

furnishings, and seven years for fixtures.

(Amounts in NOK million)

Interest-

bearing

debt

Other

liabilities

< 1 yea r 1,735.6 89.5

1-2 year 3,103.4

3-5 year 4,731.5

Over 5 year 4,162.8

Expected cash flow 13,733.3 89.5

Book value 12,093.4 89.5

Npro 1 AS

NPRO

Holding

AS

NPRO

Invest AS

Acquired/established Date 23.11.20 17.01.07 26.09.13

Business office City Oslo Oslo Oslo

Share

1

Per cent 100.0 100.0 100.0

Book value NOK mill. 0.1 4,986.7 0.1

(Amounts in NOK million) 2021 2020

Book value at 1 January 4,665.4 8,553.9

Investments in subsidiaries - 0.1

Dividends - (2,500.0)

Group contribution recognised

against shares in subsidiaries

321.3 (1,388.6)

Book value at 31 December 4,986.8 4,665.4

(Amounts in NOK million)

IT-systems

and other

intangible

assets

Fixtures

and

equipment

Total

Acquisition cost:

At 31 December 2019 28.6 2.0 30.6

Additions 0.6 1.1 1.7

Disposals (11.1) - (11.1)

At 31 December 2020 18.1 3.1 21.2

Additions 0.9 0.6 1.5

At 31 December 2021 19.0 3.8 22.7

Accumulated

depreciation:

At 31 December 2019 28.6 0.8 29.3

Disposals (11.1) - (11.1)

Depreciation and

impairment for the year

0.5 0.4 1.0

At 31 December 2020 18.0 1.2 19.2

Depreciation and

impairment for the year

0.3

0.4 0.8

At 31 December 2021 18.3 1.6 20.0

Book value:

At 31 December 2019 - 1.3 1.3

At 31 December 2020 0.1 1.9 2.0

At 31 December 2021 0.6 2.1 2.8

Annual report 2021 - Norwegian Property ASA

Annual accounts of the parent company Page 58

NOTE 6: Equity

6.1 - Change in equity

Changes in the balance-sheet items for equity are

specified in the table below.

1

The share capital of NOK 324 912 798 consisted as at 31 December

2021 of 649,825,596 shares, each with a par value of NOK 0.50. The

holding of treasury shares as at 31 December 2021 was 6,250,000

shares.

6.2 - The company's largest shareholders at 31

December

As at 31 December 2021, the company has a share

capital of NOK 324,912,798 divided into

649,825,596 shares, each with a par value of NOK

0.50. The company owns 6,250,000 treasury

shares. Geveran Trading Co. Ltd. owns the

remaining 643,575,596 shares in the company.

In July 2021, Geveran Trading Co. Ltd. (Geveran)

acquired shares equalling more than 90 per cent

of the shares in Norwegian Property ASA. In

August 2021, Geveran carried out a compulsory

acquisition of all the remaining shares and the

shares in Norwegian Property ASA was delisted

from the Oslo Stock Exchange.

The compulsory acquisition included the following

shareholdings for senior executives and directors:

- 130,313 shares owned by Max Eiendom

AS and 275,686 shares owned by

Camvecti Holding AS, where both

companies are wholly owned by the

deputy chair Bjørn Henningsen.

- 356,664 shares and a TRS agreement

relating to 4,262,801 shares owned by

Carucel Holding AS, which is a wholly

owned company of the director Carl Erik

Krefting.

- 55,000 shares owned by Yanka AS, which

is a wholly owned company of the CEO

Bent Oustad.

As at 31 December 2020, the group’s largest

shareholders were as follows:

(Amounts in NOK

million)

Share

capital

1

Own

shares

Share

prem-

ium

Other

equity

Total

equity

Equity at 31

December 2019

249.9 (3.1) 1,602.2 396.6 2,245.6

Paid dividend - - - - -

Share issue 75.0 - 1,602.6 - 1,677.6

Employee share

options

- - - 1.8 1.8

Dividend

appropriation

- - - (64.4) (64.4)

Transactions with

shareholders

75.0 - 1,602.6 (62.6) 1,615.0

Profit for the year - - (300.8) (300.8)

Profit for the year - - - (300.8) (300.8)

Equity at 31

December 2020

324.9 (3.1) 3,204.8 33.2 3,559.8

Paid dividend - - (209.2) - (209.2)

Share issue - - (0.7) - (0.7)

Employee share

options

- - - 0.7 0.7

Settlement of

share-option

schemes

- - - (3.8) (3.8)

Dividend

appropriation

- - (243.4) (30.1) (273.5)

Transactions with

shareholders

- - (453.2) (33.2) (486.4)

Profit for the year - - (52.9) - (52.9)

Loss for the year - - (52.9) - (52.9)

Equity at 31

December 2021

324.9 (3.1) 2,698.7 0.0 3,020.5

Annual report 2021 - Norwegian Property ASA

Annual accounts of the parent company Page 59

6.3 - Shares held by senior executives and

directors as at 31 December 2021

The directors Cecilie Astrup Fredriksen, Kathrine

Astrup Fredriksen and Lars Erich Nilsen are related

to Geveran Trading Co Ltd, which is the company’s

sole proprietor as at 31 December 2021.

6.4 - Share options

Share options had been granted to the CEO and

the director Carl Erik Krefting. Each share option

entitles the holder to subscribe for a share in

Norwegian Property ASA.

The fair value of the options is calculated at the

time of allocation and expensed over the vesting

period. The following amount has been

recognised against equity in relation to the

employee options as at 31 December.

The option agreement with the CEO was entered

into in 2017 and entitles him to subscribe to a

total of 5,750,000 shares as follows.

The options will lapse if they are not exercised by

1 July 2022. As an alternative to delivering shares,

the board of Norwegian Property may opt to

settle the profit in cash. The agreement otherwise

contains normal conditions on such matters as

continued employment and adjustment of share

prices and so forth as a result of corporate events.

The total fair value of share options granted in

2017 was NOK 11.2 million (excluding the

employer’s National Insurance contribution). The

fair value is calculated by external valuers based

on the Black-Scholes model. In calculating fair

value, volatility in the period was set at 27.43 per

cent and the risk-free interest rate at 0.97 per

cent. The share price at the grant date was NOK

10.45.

The option agreement with the director was

entered into in 2018 and entitled him to subscribe

to a total of 500,000 shares as follows.

The options were exercised in the third quarter of

2021. The NOK 3.8 million profit was settled in

cash.

NOTE 7: Other current liabilities

Other current liabilities as at 31 December are

specified in the table below.

Employee options

Number of

options

Weighted

average

excercise

price (NOK)

Outstanding 1 January 2020 6,250,000 12.46

Awarded - -

Exercised - -

Terminated - -

Outstanding 31 December 2020 6,250,000 12.46

Earned 1 January 2021 4,083,333 11.50

Outstanding 1 January 2021 6,250,000 12.46

Awarded - -

Exercised -500,000 11.50

Terminated - -

Outstanding 31 December 2021 5,750,000 12.54

Earned 1 January 2022 5,750,000 12.54

Employee options 2021 2020

Recognised against equity at 1

January

11.4 9.6

Recognised in profit and loss during

the period

0.7 1.8

Recognised against equity at 31

December

12.1 11.4

Earliest exercise date No. of shares Subscr. price (NOK)

01.01.2019 1,000,000 10.00

01.01.2020 1,250,000 11.50

01.01.2021 1,500,000 12.50

01.01.2022 2,000,000 14.50

Earliest exercise date No. of shares Subscr. price (NOK)

19.04.2019 166,666 11.50

19.04.2020 166,667 11.50

19.04.2021 166,667 11.50

(Amounts in NOK million) 2021 2020

Public duties 4.6 3.2

Accrued salaries 6.3 5.7

Accrued interest 72.6 66.2

Trade payables 2.1 0

.3

Other payables 17.8 1

4.1

Total other current liabilities 103.4 89.5

Annual report 2021 - Norwegian Property ASA

Annual accounts of the parent company Page 60

NOTE 8: Interest-bearing debt

The table below presents an overview as at 31

December of the company’s interest-bearing

debt, including hedging ratio, average interest

rate and remaining term to maturity.

1

All interest-rate swaps which had commenced at the balance-sheet

date.

The company’s interest-bearing non-current and

current debt as at 31 December is specified in the

tables below.

2021:

2020:

The group had 10 bonds totalling NOK 11,471

million outstanding as at 31 December 2021.

These fall due as follows: NOK 1,889 million in

2022, NOK 400 million in 2023, NOK 2,615 million

in 2024, NOK 1,675 million in 2025, NOK 1,350

million in 2026 and NOK 3,542 million in 2030. All

bonds are secured by properties and are listed on

the Oslo Stock Exchange.

Norwegian Property has a NOK 1 billion overdraft

facility with Nordea, SEB and DNB, where

drawings are secured by a portfolio of properties.

In addition, the company has a NOK 530 million

bilateral overdraft facilities with SEB secured by a

mortgage on Snarøyveien 30, a NOK 200 million

bilateral overdraft facilities with DNB secured by a

mortgage on Vinslottet and an overdraft facility

with DNB and SEB of NOK 600 million with a

mortgage on Verkstedhallen at Aker Brygge. The

security is shared with bond holders. The facilities

are subject to annual renewal. The most

important terms for all these facilities are a

minimum interest-rate hedge ratio of 50 per cent,

interest cover of at least 1.4 and a maximum LTV

of 75 per cent. The agreed requirements in the

loan agreements were met at year-end 2021 and

2020, as well as all the quarterly interim reporting

dates in 2021 and 2020.

Maturities for the company’s non-current

interest-bearing debt as at 31 December are

broken down in the table below.

The carrying amount of assets pledged as security

for debt as at 31 December is as follows.

1

Shares in property companies owned by other group entities are

also pledged as security for the corporate facilities in Norwegian

Property ASA. See also note 15 to the group’s financial statements.

2

Properties owned by the subsidiaries have been pledged as security

for bonds.

2021 2020

Interest-bearing debt (NOK million) 12,002.6 12,093.4

- of which hedged (NOK million)

1

8,547.0 9,147.0

Interest hedging ratio (per cent) 71.2 75.6

Cash and cash equivalents (NOK million) 290.9 624.2

Unutilised credit facilities (NOK million) 1,800.0 910.0

Average interest rate (per cent) 2.81 2.94

Average interest margin (per cent) 1.33 1.39

Remaining time to maturity for interest-

bearing debt (years)

4.4 4.7

Remaining time to maturity for interest

hedge agreements (years)

6.3 6.7

(Amounts in NOK million)

Long-term Short-term Tota

l

Bank borrowings - 530.0 530.0

Bonds 9,582.0 1,889.0 11,471.0

Total interest-bearing debt 9,582.0 2,419.0 12,001.0

Capitalised borrowing cost 0.5 1.2 1.6

Total book value interest-bearing debt 9,582.5 2,420.2 12,002.6

(Amounts in NOK million)

Long-term Short-term Total

Bank borrowings 530.0 1,400.0 1,930.0

Bonds 10,185.0 - 10,185.0

Total interest-bearing debt 10,715.0 1,400.0 12,115.0

Capitalised borrowing cost (16.6) (5.1) (21.6)

Total book value interest-bearing debt 10,698.4 1,394.9 12,093.4

(Amounts in NOK million)

2021 2020

Due in 2023 and 2024 (2022 and 2023) 3,015.0 3,2

30.0

Due in 2025, 2026 and 2027 (2024, 2025

and 2026)

3,025.0 3,943.0

Due after 2027 (after 2025) 3,542.0 3,542.0

Total 9,582.0 10,715.0

(Amounts in NOK million)

2021 2020

Investment in subsidiaries

1

4,986.8 4,665.4

Total 4,986.8 4,665.4

Liabilities secured

2

530.0 1,930.0

Annual report 2021 - Norwegian Property ASA

Annual accounts of the parent company Page 61

NOTE 9: Derivatives

9.1 - Derivatives in the annual accounts

The company is exposed to interest-rate risk

related to loans with floating interest rates, and

interest-rate hedge agreements have been

entered into in order to reduce the interest-rate

risk. Unrealised gains/losses associated with such

agreements are recognised in the income

statement.

The fair value of derivatives is determined by the

net present value of future cash flows, calculated

using quoted interest-rate curves and exchange

rates at the balance-sheet date. The technical

calculations are generally prepared by the

company’s banks. The company checks and tests

the valuation for reasonableness. The fair value of

the company’s derivatives as at 31 December is

specified in the table below.

2021:

2020:

9.2 - Interest-rate derivatives

The majority of Norwegian Property’s floating-

rate loans are hedged with interest-rate hedges.

Norwegian Property has a policy of hedging a

minimum of 70 per cent of the interest-bearing

debt outstanding at any given time. Despite the

hedging positions, the company’s financial assets

and cash flow will be exposed to fluctuations in

the applicable market interest rate. Because of

these fluctuations, the interest-rate cost will vary.

Notional principal amounts for the company’s

interest-rate hedges as at 31 December are

specified in the table below. The maturity dates

are broken down in note 3.

NOTE 10: Payroll costs and remuneration of

executive officers and auditor

The payroll cost for the year is as follows.

Pursuant to the Norwegian Act on Mandatory

Occupational Pensions, Norwegian Property ASA

is required to operate certain pension plans. The

company has plans which satisfy these

requirements (defined contribution plan for all

employees).

Remuneration to the auditor is specified in the

table below.

1

Fees to PricewaterhouseCoopers AS (PwC) and collaborating

companies. The fees are net of VAT (amounts in NOK).

(Amounts in NOK million) Assets Liabilities

Interest-rate contracts 17.3 44.2

(Amounts in NOK million) Assets Liabilities

Interest-rate contracts 17.1 92.6

Currency 2020 2019

Notional principal

amount

NOK 6 070.0 5 770.0

(Amounts in NOK million) 2021 2020

Salaries and remuneration 65.4 59.1

Employee share option schemes 0.7 2.5

Social security costs 11.8 7.8

Pension costs (defined contribution

plan)

2.4 2.5

Other employee expenses 0.9 1.2

Total payroll costs

81.2 73.2

Number of employees at 31

December

51 43

Number of full-time equivalent

positions in the fiscal year

48 46

Average number of employees in the

fiscal year

47 42

Type of fees 2021 2020

Statutory audit 704,800

476,000

Tax/VAT advice 299,600 308,900

Total 1,004,400 784,900

Annual report 2021 - Norwegian Property ASA

Annual accounts of the parent company Page 62

Fees to directors in 2021 are presented in the

table below.

1

Reported benefits paid in 2021 (amounts in NOK). In addition to that

are the employer’s National Insurance contributions (14.1 per cent).

2

Amount expensed in the accounts for 2021. See note 6.4 for

information about options exercised in 2021.

Fees to directors in 2020 are presented in the

table below.

1

Reported benefits paid in 2020 (amounts in NOK). In addition to that

are the employer’s National Insurance contributions (14.1 per cent).

2

Amount expensed in the accounts for 2020. No options have been

exercised in 2020.

Remuneration of senior management in 2021 is specified in the table below.

1

Reported pay for services in 2021 (amounts in NOK). In addition to that are the employer’s National Insurance contributions (14.1 per cent).

2

Amount expensed in the accounts for 2021. No options have been exercised in 2021.

3

Contribution paid to defined contribution pension plans and employee insurance in 2021 (amounts in NOK).

4

Started 31 October 2021.

Remuneration of senior management in 2020 is specified in the table below:

1

Reported pay for services in 2020 (amounts in NOK). In addition to that are the employer’s National Insurance contributions (14.1 per cent).

2

Amount expensed in the accounts for 2020. No options have been exercised in 2020.

3

Contribution paid to defined contribution pension plans and employee insurance in 2020 (amounts in NOK).

4

Started 1 January 2020.

Name

Remune-

ration

1

Share

based

paym

ent

expense

2

700,000 -

450,000 -

250,000 -

250,000 20,922

250,000 -

Total

2,400,000 20,922

Merete Haugli, chair 01.01-31.12

Bjørn Henningsen, deputy chair 01.01-31.12

Cecilie Astrup Fredriksen, director 01.01-31.12

Carl Erik Krefting, director 01.01-31.12

Kathrine Astrup Fredriksen, director 01.01-31.12

Anders Buchardt, director 01.01-31.12

Lars Erich Nilsen, director 01.01-31.12

Name

Remune-

ration

1

Share

based

paym

ent

expense

2

700,000 -

450,000 -

250,000 -

250,000 120,984

250,000 -

187,500 -

Total

2,337,500 120,984

Merete Haugli, chair 01.01-31.12

Bjørn Henningsen, deputy chair 01.01-31.12

Cecilie Astrup Fredriksen, director 01.01-31.12

Anders Buchardt, director 16.04-31.12

Kathrine Astrup Fredriksen, director 01.01-31.12

Carl Erik Krefting, director 01.01-31.12

Lars Erich Nilsen, director 01.01-31.12

Name

Title Salary

1

Bonuses

1

Share based

payment

expense

2

Other

benefits

1

Pension/

insurance

benefits

3

Bent Oustad CEO 3,915,188 2,625,000 703,344 4,392 94,128

Haavard Rønning CFO 2,657,422 1,297,500 - 7,831 93,883

Bjørge Aarvold EVP property management 1,916,644 561,000 - 124,392 104,165

Ellen Cathrine Kobro EVP sales and marketing 2,132,951 630,000 - 7,392 93,198

Sindre Kornrud EVP projects 1,775,167 534,000 - 4,392 92,757

Thomas Weeden

4

EVP business development and strategy 487,500 - - 1,098 24,464

Total 12,884,872 5,647,500 703,344 149,497 502,595

Name

Title Salary

1

Bonuses

1

Share based

payment

expe

nse

2

Other

benefits

1

Pension/

insurance

benef

its

3

Bent Oustad CEO 3,783,135 2,625,000 1,645,668 4,392 86,718

Haavard Rønning CFO 2,601,248 1,275,000 - 16,541 86,434

Bjørge Aarvold EVP property management 1,875,627 440,640 - 141,456 97,892

Ellen Cathrine Kobro EVP sales and marketing 1,975,863 550,800 - 19,324 86,767

Sindre Kornrud

4

EVP projects 1,662,323 - - 15,286 74,243

Total 11,898,196 4,891,440 1,645,668 196,999 432,054

Annual report 2021 - Norwegian Property ASA

Annual accounts of the parent company Page 63

NOTE 11: Net financial items

Net financial items for the year are as follows.

NOTE 12: Deferred tax and income tax

The tax expense for the year in the income

statement and deferred taxes in the balance sheet

are as follows.

(Amounts in NOK million) 2021 2020

Financial income:

Interest income from group companies

156.4 8.4

Other interest income

154.1 -

Changes in value of financial derivative

instruments

150.2 -

Other financial income

0.1

-

Total financial income

460.8 8.4

Financial expenses:

Interest cost on loans

(349.8) (221.1)

Changes in value of financial derivative

instruments

- (101.6)

Other financial expenses (19.9) (9.4)

Total financial expenses

(369.7) (332.1)

Net financial items 91.1 (323.7)

(Amounts in NOK million) 2021 2020

The tax expense for the year is

distributed as follows:

Tax payable 3.2 -

Changes in deferred tax 84.2 (75.7)

Income tax expense 87.4 (75.7)

Calculation of the tax base for the year:

Profit before tax 34.5 (376.5)

Permanent differences (3.4) 32.6

Changes in temporary differences 351.6 80.2

Group contribution 156.0 443.0

Tax base for the year 538.8 179.3

Specification of temporary differences

and deferred tax:

Tangible assets (10.8) (

12.0)

Financial derivative instruments (26.9) (

177.0)

Provisions (2.2) 21.1

Tax loss and interests carried forward (1,883.1) (2,293.8)

Basis for deferred tax (1,923.0) (2,461.8)

Deferred tax in the balance sheet 423.1 5

41.6

Reconciliation of tax expense and

calculated effective tax rate:

Calculated tax expense on profit before

tax (22 per cent)

7.6 (82.8)

Permanent differences 76.6 7.2

Tax payable 3.2 -

Income tax expense 87.4 (75.7)

Effective tax rate (per cent) 253.2 20.1

Annual report 2021 - Norwegian Property ASA

Annual accounts of the parent company Page 64

NOTE 13: Related-party disclosures

All transactions, agreements and business

relationships with related parties are made on

normal commercial terms.

Financial relationships related to the board and

senior management are described in notes 6 and

10.

A management fee of NOK 2.4 million has been

expensed in 2021 from a company related to the

shareholder Geveran Trading Co. Ltd.

Income-statement and balance-sheet items

related to group companies are specified in the

table below.

NOTE 14: Contingent liabilities

Norwegian Property ASA has no substantial

contingent liabilities through guarantees or other

circumstances arising in the ordinary course of

business.

NOTE 15: Events after the balance-sheet date

Events after the balance-sheet date are events,

favourable or unfavourable, which occur between

the balance-sheet date and the date when the

financial statements are authorised for issue. Such

events can be events which provide information

on conditions which existed at the balance-sheet

date, resulting in adjustments to the financial

statements or events which do not require such

adjustments.

No significant events have occurred after 31

December 2021 which provide information on the

conditions existing as at the balance-sheet date.

(Amounts in NOK million) 2021 2020

Income statement:

Management and service fee, group companies 50.9 45.6

Rental cost, subsidiaries (5.1) (7.5)

Interest income from group companies (note 11) 156.4 8.4

Balance sheet:

Investments in subsidiaries (note 4) 4,986.8 4,665.4

Current assets, intercompany balances 9,720.8 10,149.5

Annual report 2021 - Norwegian Property ASA

Declaration by the board of directors and the CEO Page 65

Declaration by the board of directors and the CEO

The board and the chief executive have considered and approved the directors’ report and the annual

consolidated and parent company financial statements for Norwegian Property ASA as at 31 December

2021. The consolidated financial statements for the year have been prepared in accordance with the IFRS as

approved by the EU and associated interpretative statements, as well as the additional Norwegian

information requirements pursuant to the Norwegian Accounting Act and which were to be applied as at 31

December 2021. The parent company financial statements for the year have been prepared in accordance

with the Norwegian Accounting Act and Norwegian generally accepted accounting standards as at 31

December 2021. The directors’ report for the group and the parent company accords with the requirements

of the Accounting Act and good Norwegian accounting practice (NRS 16 directors’ report) as at 31 December

2021.

To the best of our knowledge, we hereby confirm that:

• the consolidated and parent company financial statements for 2021 have been prepared in

accordance with the applicable accounting standards.

• the information in the financial statements provides a true and fair picture of the overall assets,

liabilities, financial position and financial results of the parent company and the group as at 31

December 2021.

• the directors’ report for the group and the parent company provides a true and fair view of the

development, financial results and position of the group and the parent company, and of the

most important risk factors and uncertainties facing the group and the parent company.

Oslo, 24 March 2022

Norwegian Property ASA

Annual report 2021 - Norwegian Property ASA

Independent auditors report Page 66

Independent auditors report

Annual report 2021 - Norwegian Property ASA

Independent auditors report Page 67

Annual report 2021 - Norwegian Property ASA

Independent auditors report Page 68

Annual report 2021 - Norwegian Property ASA

Independent auditors report Page 69

Annual report 2021 - Norwegian Property ASA

Independent auditors report Page 70

Annual report 2021 - Norwegian Property ASA

Independent auditors report Page 71

Annual report 2021 - Norwegian Property ASA

Key figures Page 72

Key figures

Financial highlights

Annual report 2021 - Norwegian Property ASA

Key figures Page 73

Key figures funding

Annual report 2021 - Norwegian Property ASA

Key figures Page 74

Key financial figures and APMs

The table below shows a summary of key IFRS figures from the annual group accounts as well as alternative

performance measures (APMs). The financial information for Norwegian Property is prepared in accordance

with IFRS. The company also reports on supplementary financial alternative performance measures (APMs).

1

The IFRS figures appear in the annual group accounts.

2

APMs which do not derive directly from the IFRS group accounts and explained in the overview of definitions at the end of this report.

3

When calculating the APMs and IFRS measures per share, the figures related to the profit and cash flow have been divided by the average number of

shares for the period, and those related to the balance sheet by the number of shares at the end of the period. The number of shares excludes treasury

shares.

4

The calculation of the EPRA APMs is specified in the separate EPRA performance measures section of this report.

Profit and loss measures Measure Units 2021 2020

Revenues

IFRS

1

NOK mill. 919.6 1,564.5

Operating profit before administrative expenses

APM

2

NOK mill. 795.1 1,457.8

Operating profit before value adjustments

IFRS

1

NOK mill. 810.8 610.3

Profit before income tax and value adjustments

APM

2

NOK mill. 479.7 349.7

Change in fair value of investment property and rental guarantee

IFRS

1

NOK mill. 1,365.0 1,827.5

Profit before income tax

IFRS

1

NOK mill. 1,994.9 2,075.6

Profit after income tax

IFRS

1

NOK mill. 1,573.1 1,675.9

Balance sheet measures Mea s ure Units 2021 2020

Market value of property portfolio

APM

2

NOK mill. 25,143.0 23,450.0

Market value of joint ventures

APM

2

NOK mill. 2,342.8 1,942.0

Gross interest-bearing debt

APM

2

NOK mill. 12,004.8 12,097.1

Net interest-bearing debt

APM

2

NOK mill. 11,594.7 11,331.3

Net LTV

APM

2

Per cent 42.2 44.6

Total equity

IFRS

1

NOK mill. 12,836.6 11,560.9

Equity ratio

APM

2

Per cent 47.9 45.5

Pre-tax return on equity

APM

2

Per cent 16.4 3.5

Cash flow measures Mea s ure Units 2021 2020

Net cash flow from operating activities

IFRS

1

NOK mill. 447.1 1,007.8

Cash and cash equivalents (year end balance)

IFRS

1

NOK mill. 313.5 665.8

IFRS measures; per share Mea s ure Units 2021 2020

Number of shares outstanding, end of the period Mill. shares 643.6 643.6

Average number of shares in the period Mill. shares 643.6 535.5

Profit before income tax (IFRS)

APM

3

NOK 3.10 3.88

Earnings per share (EPS)

APM

3

NOK 2.44 3.13

Net cash flow from operating activities (IFRS)

APM

3

NOK 0.69 1.88

Gross interest-bearing debt

APM

3

NOK 18.65 18.80

NAV, book value

APM

3

NOK 19.95 17.96

EPRA performance measures Measure Units 2021 2020

EPRA Earnings

EPRA earnings, per share

APM

4

NOK 0.48 0.47

EPRA NAV metrics

Net Reinstatement Value (NRV), per share

APM

4

NOK 25.17 22.27

Net Tangible As s ets (NTA), per share

APM

4

NOK 24.84 21.97

Net Disposal Value (NDV), per share

APM

4

NOK 21.87 19.37

EPRA net initial yield

EPRA Net Initial Yield (NIY)

APM

4

Per cent 3.89 3.84

EPRA “Topped-up” NIY

APM

4

Per cent 3.95 3.90

EPRA vacancy rate

APM

4

Per cent 5.56 7.06

EPRA cost ratio

EPRA cost ratio, including direct vacancy cost

APM

4

Per cent 20.13 21.66

EPRA cost ratio, excluding direct vacancy cost

APM

4

Per cent 17.89 18.41

Annual report 2021 - Norwegian Property ASA

EPRA Performance Measures Page 75

EPRA Performance Measures

EPRA (European Public Real Estate Association) is an association for the publicly traded European real estate

sector. EPRA was founded in 1999 as a not-for-profit association. It has more than 275 members, covering

the whole spectrum of the listed real estate industry (companies, investors and their suppliers). EPRA’s

mission is to promote, develop and represent the European public real estate sector through the provision of

better information to investors and stakeholders, active involvement in the public and political debate,

promotion of best practices as well as the cohesion and strengthening of the industry. For further

information, see www.epra.com.

EPRA has issued Best Practices Recommendations Guidelines on areas of reporting that are the most

relevant to investors and where more consistent reporting across Europe would bring the greatest benefits

in the overall transparency of the sector.

Norwegian Property report on the following EPRA Performance Measures.

EPRA Earnings

EPRA Earnings is a key measure of the underlying operating performance of the property portfolio and an

indication of the extent to which current dividend payments are supported by earnings. EPRA Earnings is

calculated based on the IFRS Earnings for the commercial property portfolio adjusted for changes in the

market value of investment properties, changes in the market value of financial derivative instruments and

the related tax effects.

1

Earnings from the Nordr joint venture (JV) are adjusted for as it is related to the development of residential properties for sale, and they are not

relevant for the measurement of the performance of the commercial property portfolio.

EPRA NAV Metrics

The EPRA NAV set of metrics make adjustments to the NAV per the IFRS financial statements to provide

stakeholders with the most relevant information on the fair value of the assets and liabilities of a real estate

investment company, under different scenarios.

EPRA Net Reinstatement Value (NRV)

The EPRA NRV metric assumes that entities never sell assets and it aims to represent the value required to

rebuild the entity.

Investments in JVs are revalued based on an estimated fair value of such investments. The fair value on

financial derivatives and deferred taxes on investment properties are excluded. Property transfer taxes do

EPRA earnings 31/12/2021 31/12/2020

IFRS earnings NOK mill. 1,573.1 1,675.9

Adjustments to calculate EPRA Earnings:

Change in market value of inv. property and rental guarantee NOK mill. (1,365.0) (1,827.5)

Change in market value of financial derivative instruments NOK mill. (150.2) 101.6

Share of profit from JVs

1

NOK mill. (75.5) 0.4

Income tax NOK mill. 326.7 298.9

EPRA earnings NOK mill. 309.1 249.3

Average outstanding shares (million) Mill. shares 643.6 535.5

EPRA Earnings per share NOK 0.48 0.47

Annual report 2021 - Norwegian Property ASA

EPRA Performance Measures Page 76

not normally apply to Norwegian transactions and, therefore, such taxes are not included in the NRV

calculation. The fair value of financial instruments, which are used for hedging purposes where the company

has the intention of keeping the hedge position until the end of the contractual duration, is excluded. Under

normal circumstances, the financial derivatives that companies use to provide an economic hedge are held

until maturity and so any fair value movements will not crystallise.

EPRA Net Tangible Assets (NTA)

The EPRA NTA metric assumes that entities buy and sell assets, thereby crystallising certain levels of

unavoidable deferred tax.

Investments in JVs are revalued based on an estimated fair value of such investments. Norwegian Property

has adopted the second option in the EPRA BPR guidelines to adjust for deferred tax, estimating the real tax

assets and liabilities based on how the company has previously carried out transactions and otherwise

utilised the existing tax positions. The fair value of financial instruments that are used for hedging purposes

are excluded.

2

Estimated fair value of deferred taxes where the estimated fair value of the tax asset related to carry-forward losses are greater than the estimated

fair value of relevant tax liabilities. The calculations assume that carry-forward losses can be utilised over the next 5 years with a discount rate of 5 per

cent. The real tax liability related to the gains/losses accounts is estimated on the basis of the annual depreciation rates in the Norwegian tax

legislation and a discount rate of 5 per cent. The estimated fair value of the deferred tax liability related to the temporary differences of properties as

at 31 December 2021 has been calculated to 3.6 per cent based on a discount rate of 5 per cent and the assumption that properties outside Aker

Brygge are realised over the next 50 year period in transactions structured as the sale of companies in which the tax discount is 5.7 per cent.

EPRA Net Reinstatement Value (NRV) 31/12/2021 31/12/2020

IFRS equity NOK mill. 12,836.6 11,560.9

Revaluation of investments made in JVs NOK mill. 1,258.0 928.4

Net Asset Value (NAV) at fair value NOK mill. 14,094.6 12,489.3

Deferred tax on properties and financial instruments NOK mill. 2,077.4 1,668.9

Net fair value on financial derivatives NOK mill. 26.9 177.1

Net Reinstatement Value (NRV) NOK mill. 16,198.9 14,335.2

Outstanding shares at period end (million) Mill. shares 643.6 643.6

NRV per share (NOK) NOK 25.17 22.27

EPRA Net Tangible Assets (NTA) 31/12/2021 31/12/2020

IFRS equity NOK mill. 12,836.6 11,560.9

Revaluation of investments made in JVs NOK mill. 1,258.0 928.4

Net Asset Value (NAV) at fair value NOK mill. 14,094.6 12,489.3

Reversal deferred tax liability as per balance sheet NOK mill. 1,685.8 1,268.0

Adjustment for estimated fair value of deferred tax

2

NOK mill. 182.1 205.5

Net fair value on financial derivatives NOK mill. 26.9 177.1

Net Tangible Assets (NTA) NOK mill. 15,989.5 14,139.9

Outstanding shares at period end (million) Mill. shares 643.6 643.6

NTA per share (NOK) NOK 24.84 21.97

Annual report 2021 - Norwegian Property ASA

EPRA Performance Measures Page 77

EPRA Net Disposal Value (NDV)

The EPRA NDV metric represents the shareholders’ value under a disposal scenario, where deferred tax,

financial instruments and certain other adjustments are calculated to the full extent of their liability, net of

any resulting tax.

Investments in JVs are revalued based on an estimated fair value of such investments. Financial liabilities are

valued at the estimated fair value, net of deferred tax.

3

The fair value adjustment related to financial liabilities is related to the valuation as shown in note 8 to the interim financial statement, where the

estimated difference between the current margins and the market conditions are taken into account as well as changes in the fair value of listed

bonds. Tax is taken into account with 22 per cent.

EPRA Net Initial Yield

EPRA Net Initial Yield (NIY) and EPRA “Topped-up” NIY

The EPRA Net Initial Yield metrics presents annualised rental income based on the cash rents passing at the

balance sheet date, less non-recoverable property operating expenses, divided by the market value of the

property and increased with estimated purchasers’ costs. The EPRA NIY is a comparable measure for

portfolio valuations.

The EPRA “Topped-up” NIY metric incorporates an adjustment to the EPRA NIY in respect of the expiration of

rent-free periods or other unexpired lease incentives such as discounted rent periods and step rents.

4

Applies to the property Sandakerveien 140 (Gullhaugveien 9-13 building A-B).

EPRA Net Disposal Value (NDV) 31/12/2021 31/12/2020

IFRS equity NOK mill. 12,836.6 11,560.9

Revaluation of investments made in JVs NOK mill. 1,258.0 928.4

Net Asset Value (NAV) at fair value NOK mill. 14,094.6 12,489.3

Fair value adjustment of financial liabilities, net of tax

3

NOK mill. (21.7) (22.3)

Net Disposal Value (NDV) NOK mill. 14,072.9 12,467.0

Outstanding shares at period end (million) Mill. shares 643.6 643.6

NDV per share (NOK) NOK 21.87 19.37

EPRA Net Initial Yield 31/12/2021 31/12/2020

Investment property, wholly owned NOK mill. 25,143.0 23,450.0

Investment property, share of JVs NOK mill. 8.7 10.9

Total property portfolio NOK mill. 25,151.6 23,460.9

Less projects and land and developments

4

NOK mill. (589.4) -

Completed management portfolio NOK mill. 24,562.2 23,460.9

Allowance for estimated purchasers’ cost NOK mill. 97.5 93.0

Gross up completed management portfolio valuation NOK mill. 24,659.7 23,553.9

12 months rolling rent, including share of JVs NOK mill. 1,040.5 983.7

Estimated ownership cost NOK mill. (81.5) (79.5)

Annualised net rents NOK mill. 959.0 904.2

Rent free periods or other lease incentives NOK mill. 15.8 15.3

Topped up net annualised net rents NOK mill. 974.7 919.5

EPRA NIY (net initial yield) Per cent 3.89 3.84

EPRA "topped-up" NIY (net initial yield) Per cent 3.95 3.90

Annual report 2021 - Norwegian Property ASA

EPRA Performance Measures Page 78

EPRA Vacancy Rate

The EPRA Vacancy Rate is calculated based on the Estimated Market Rental Value (ERV) of vacant space

divided by the ERV of the whole portfolio, and it is a per cent measure of investment property space that is

vacant, based on ERV.

5

Assumptions based on the external valuations for the periods.

EPRA Cost Ratio

The EPRA Cost Ratio is calculated based on the administrative and operating costs (including and excluding

costs of direct vacancy) divided by gross rental income. It is a key measure to enable the meaningful

measurement of the changes in a company’s operating costs.

EPRA Vacancy Rate 31/12/2021 31/12/2020

Market rent vacant areas

5

NOK mill. 60.4 76.3

Total market rent

5

NOK mill. 1,087.0 1,080.6

EPRA vacancy rate Per cent 5.56 7.06

EPRA Cost Ratios 31/12/2021 31/12/2020

Operating costs NOK mill. (183.7) (153.5)

Share of joint venture expenses NOK mill. (1.7) -

EPRA cost (including direct vacancy cost) NOK mill. (185.3) (153.5)

Direct vacancy cost NOK mill. 20.6 23.0

EPRA cost (excluding direct vacancy cost) NOK mill. (164.7) (130.5)

Gross rental income less ground rent NOK mill. 919.6 708.6

Share of joint ventures NOK mill. 0.9 -

Total gross rental income less ground rent NOK mill. 920.5 708.6

EPRA cost ratio (including direct vacancy cost) Per cent 20.13 21.66

EPRA cost ratio (excluding direct vacancy cost) Per cent 17.89 18.41

Annual report 2021 - Norwegian Property ASA

Corporate governance Page 79

Corporate governance

Norwegian Property’s corporate governance is for

securing a clear and appropriate division of the

responsibilities between the shareholder, board

of directors and executive management as well as

ensuring control of the group and contribute to a

positive trust-based relationship between

Norwegian Property and the group’s bond

investors, shareholder and other stakeholders.

Good corporate governance will contribute to the

highest possible value creation over time to the

benefit of all stakeholders.

1 Presentation on corporate governance

Norwegian Property complies with the reporting

requirements specified in section 3-3b of the

Norwegian Accounting Act. The company was de-

listed in 2021, and the requirements for reporting

on corporate governance have, therefore, been

reduced. Where relevant, the company will

continue to report according to the stock

exchange recommendation of 1 July 2019,

available on the Euronext Oslo Børs website, and

the latest version of the code of practice from the

Norwegian Corporate Governance Board (NCGB)

which was published on 14 October 2021. The

NCGB code is available at www.nues.no. These

recommendations go beyond the legal

requirements.

Below is the board’s presentation of the way

Norwegian Property has implemented the NCGB

code. Reference is made to this presentation in

the directors’ report for 2021, and it is available

on the group’s website. The presentation covers

the relevant sections of the code, and possible

variances from the code are specified under the

relevant section.

Overall principles for corporate governance have

been drawn up by the board of Norwegian

Property. The board has also prepared a set of

formal documents which specify the guidelines,

instructions and policies intended to ensure

compliance in practice with good corporate

governance. The board regularly assesses the

group’s formal documents, most recently in

March 2021. Guidelines for ethics and corporate

social responsibility (CSR) as well as principles for

investor communication are available under

formal documents at www.npro.no.

The group’s values base defines the important

principles for corporate governance. This base

rests on four core values, which form the

foundation for building a positive corporate

culture.

COLLABORATIVE

- We will be open and inclusive

- We will be generous and make ourselves

available

- We will have a personal commitment

COURAGEOUS

- We will think innovatively

- We will be ambitious

- We will challenge the established truths

PROACTIVE

- We will always seek to overcome

problems before they arise

- We will seek and discover new

opportunities

- We will present new ideas

ATTENTIVE

- We will create and retain relationships

- We will do what we promise

2 The business

Norwegian Property’s articles of association are

available on its website. Enshrined in article 3, the

group’s business purpose states:

“The Company operates in management,

acquisitions, sales and development of real estate

and infrastructure, including participation in other

companies and through trading and investment in

interest/units and securities as well as businesses

which are related to such”.

The business purpose was updated in the annual

general meeting held on 25 May 2020.

Annual report 2021 - Norwegian Property ASA

Corporate governance Page 80

Within the framework of its articles, the group has

presented goals and strategies for its business in

the directors’ report.

The board has adopted a sustainability strategy

stating that Norwegian Property is one of

Norway’s leading property companies on

sustainable growth, a better society and reduced

consumption of resources through a focus on

complete solutions and a forward-looking use of

architecture, aesthetics, technology and

materials. The strategy and achievements of the

goals and targets are further described in the

sustainability section of the annual report.

The board has formulated guidelines for ethics

and CSR in accordance with the group’s values

base. Norwegian Property’s guidelines are

available at www.npro.no. The core of the CSR

guidelines is the group’s responsibility for the

people, society and environment affected by its

operations, and they deal with human rights, anti-

corruption, labour conditions, health and safety,

discrimination and the environmental aspects.

More details are provided in the presentation on

CSR. These guidelines are subject to annual

consideration by the board, and they were

updated most recently in March 2021.

3 Equity and dividends

Equity

Consolidated equity as at 31 December 2021

totalled NOK 12,836.6 million. The equity ratio at

the same date was 47.9 per cent. The board

regards the equity ratio as satisfactory in relation

to the group’s goals, strategy and risk profile.

To secure good financial leeway, the group has a

long-term ambition for the relationship between

net interest-bearing debt and gross fair value of

the properties to be in the range of 45-55 per cent

over a business cycle. The group’s financial

flexibility is assessed at any given time in relation

to the group’s goals, strategy and risk profile. As

at 31 December 2021, the relationship between

net interest-bearing debt and gross fair value (net

LTV) was 42.2 per cent.

Dividend

Pursuant to the group’s dividend policy, a goal for

Norwegian Property is to pay competitive

quarterly dividends. It aims to pay a dividend of

30-50 per cent of its profit after tax payable, but

before fair-value adjustments. The dividend can

be higher in times of good cash flow or property

sales. An updated assessment by the board of the

group’s financial position and prospects are

carried out before any dividend is determined.

Dividends corresponding to 102 per cent of the

basis for calculating such payments have been

paid in 2021. The board has been mandated by

the general meeting to determine quarterly

dividends on the basis of the approved financial

statements for 2020. Net LTV as at 31 December

2021 was below the range specified in the group’s

financial policy.

The dividend policy is also described in note 24 to

the consolidated financial statements in this

annual report and in the investor relations section

of the group’s website.

Board mandates

The AGM of 16 April 2021 mandated the board to

increase the group’s share capital by up to NOK

32,490,000, corresponding to just under 10 per

cent of the group’s share capital when the

mandate was awarded. The board mandate is

motivated by the desire to be in a position to

issue new shares in return for cash payment, as

settlement for property transactions and/or as a

component in fulfilling incentive schemes for

employees and/or directors. As a consequence of

these purposes, it was also resolved that the

board could decide to waive the pre-emptive right

of existing shareholders to new shares. In line

with the NCGB code, a separate vote was held on

each of the three purposes. The incentive scheme

for one of the directors, which has been exercised

during 2021, did not accord with the NCGB code.

This mandate had not been utilised on 31

December 2021.

In addition, the board was mandated to raise

convertible loans totalling NOK 840 billion. This

Annual report 2021 - Norwegian Property ASA

Corporate governance Page 81

was because the board wanted to have the

opportunity to issue new shares in combination

with additional debt, partly in order to optimise

the financing structure in Norwegian Property

ASA. This mandate had not been utilised as at 31

December 2021.

It was also resolved that the board’s overall use of

mandates to issue new shares awarded to it by

the AGM should not exceed 10 per cent of the

share capital.

The board was also mandated to purchase the

group’s own shares up to a total nominal value of

NOK 32,490,000. The grounds were that the board

could acquire the group’s own shares with the

intention of using them as settlement for property

transactions, the fulfilment of incentive schemes

for employees and/or directors, and/or in other

circumstances which are considered attractive for

the shareholders in general. In this case, too,

separate votes were held for each purpose.

The board was mandated to determine the

payment of a dividend on the basis of the group’s

financial statements for 2020. This decision was

motivated by the desire to give the board the

opportunity to pay a dividend on a rolling basis if

it considered this to be appropriate in light of the

group’s position. Norwegian Property paid a

dividend of NOK 0.425 per share in 2021.

All board mandates remain valid until the group’s

AGM in 2022, but in any event not beyond 30

June 2022.

No provisions in the articles of association

authorise the board to decide that the group will

buy back or issue its own shares or primary capital

certificates.

Geveran Trading Co. Limited (“Geveran”),

acquired 95,766,570 shares in Norwegian

Property ASA on 15 July 2021 at a price of NOK

18.25 per share. Following the acquisition,

Geveran held 618,867,613 shares, equalling 95.2

per cent of the shares and votes in the company.

Geveran carried out a compulsory acquisition of

the remaining shares in Norwegian Property ASA

on 16 August 2021. The price per share was the

same as in the original offer, NOK 18.25. A general

meeting held on 20 August 2021 resolved to de-

list Norwegian Property’s shares.

4 Equal treatment of shareholders

Since 16 August 2021 Norwegian Property has

only one shareholder. Therefore, the code’s

article 4 regarding equal treatment of

shareholders is not relevant.

Norwegian Property has only one share class, and

all shares have equal rights in the group. Its

articles of association impose no voting

restrictions.

The group’s share capital amounted to NOK

298,676,726.50 divided between 597,353,453

shares, each with a par value of NOK 0.5.

5 Shares and negotiability

Since 16 August 2021, Norwegian Property has

only one shareholder, and the company has been

delisted. Therefore, the code’s article 5 regarding

the free negotiability of the shares is not relevant.

6 General meetings

Notice, registration and participation

The 2022 AGM is scheduled to take place on 22

April. The group’s financial calendar is published

as a stock exchange announcement and in the

investor relations section of the group’s website.

Notice of the general meeting, along with

comprehensive documentation, will be distributed

no later than two weeks before a meeting takes

place. As the company is no longer listed, there is

no need for 21 days’ notice.

The general meeting elects the directors on the

board. In the work of assembling the board, it is

emphasised that the board functions optimally as

a collective body, that the legal requirements for

gender representation can be met and that the

Annual report 2021 - Norwegian Property ASA

Corporate governance Page 82

directors complement each other in terms of their

background and expertise. Therefore, the general

meeting is normally invited to vote for a complete

board, rather than individual candidates as

recommended by the NCGB. As a result, no

opportunity has been provided to vote in advance

for individual candidates.

The minutes from a general meeting are

published as soon as practicable via the stock

exchange’s reporting system (www.newsweb.no,

ticker code: NPRO) and under formal documents

in the investor relations section of www.npro.no.

7 Nomination committee

In the extraordinary General Meeting on 20

August 2021, it was resolved that the company

will no longer have a nomination committee.

8 Board of directors, composition and

independence

The group does not have a corporate assembly.

Pursuant to the articles of association, the board

of Norwegian Property will comprise three to nine

directors. The board currently has seven

shareholder-elected directors. Directors and the

chair of the board have been elected by the

general meeting to serve until the AGM in 2022.

The board’s composition is intended to secure the

interests of the shareholders in general, while the

directors also collectively possess a broad

business and management background and an in-

depth understanding of the property market,

purchase and sale of businesses, financing and

capital markets. In addition, account has been

taken of the need for the board to function well as

a collegiate body. The background and experience

of directors are presented on the group’s website

and in the section of this annual report on the

presentation of the directors. The board has been

composed in such a way that it can act

independently of special interests. The group’s

executive management is not represented on the

board.

The composition of the board is in accordance

with the Public Limited Liability Companies Act §6-

11. The chairman of the board and two board

members are women, four board members are

men. There is also a good age composition of the

board members from 39 to 69 years. The

company is working to establish guidelines for

board composition to ensure equality and

diversity in the future.

Four of the seven directors are independent of

the group’s executive management, significant

commercial partners and substantial

shareholders, while three are related to the

shareholder. These are:

- Cecilie Astrup Fredriksen is an employee

of Seatankers Management Co Ltd in

London, and a director of a number of

companies, including MOWI ASA.

According to Norwegian Corporate

Governance Code, these companies are

related to the largest shareholder in

Norwegian Property, Geveran Trading Co

Ltd.

- Kathrine Astrup Fredriksen is an

employee of Seatankers Management Co

Ltd in London, and a director of SFL

Corporation Ltd and Axactor SE. She has

previously been a director of Seadrill Ltd,

Frontline Ltd, Golar LNG and others.

According to Norwegian Corporate

Governance Code, these companies are

related parties to the largest shareholder

in Norwegian Property, Geveran Trading

Co Ltd.

- Lars Erich Nilsen has been employed by

Seatankers Management Norway AS

since 2014. He serves as director of a

number of companies. According to

Norwegian Corporate Governance Code,

these companies are related to the

largest shareholder in Norwegian

Property, Geveran Trading Co Ltd.

10 board meetings were held in 2021.

9 Work of the board of directors

The board has overall responsibility for managing

the group and for supervising the CEO and the

Annual report 2021 - Norwegian Property ASA

Corporate governance Page 83

group’s activities. Its principal tasks include

determining the group’s strategy and monitoring

its operational implementation. In addition, come

control functions which ensure acceptable

management of the group’s assets. Instructions

which describe the rules of procedure for the

board’s work and its consideration of matters

have been adopted by the board. Responsibility

for ensuring that the board conducts its work in

an efficient and correct manner rests with the

chair.

The board establishes an annual plan for its

meetings, which specifies the topics for board

meetings, including reviewing and following up

the group’s goals and strategy, budgets, reporting

of financial information, the notice for the general

meeting with associated documentation and the

board’s meeting with the auditor.

The board appoints the CEO. The division of

labour between the board and the CEO is

specified in greater detail in standing instructions

for the latter. The CEO is responsible for the

group’s executive management.

The board has considered it appropriate to

appoint sub-committees to advise it. Pursuant to

the Norwegian Public Limited Liability Companies

Act, an audit committee of three directors has

been established to support the board in the

exercise of its responsibility for financial

reporting, internal control, auditing and overall

risk management. In 2021, the audit committee's

tasks were expanded to also ensure the auditor's

independence. The responsibility includes

monitoring the appropriateness of the provision

of non-audit services to the audited entity. The

audit committee was also responsible for the

election of the company’s auditor. As at 31

December 2021, the committee comprised Bjørn

Henningsen (chair), Merete Haugli and Lars Erich

Nilsen. The members of the committee are

independent of the business, and their work is

governed by a separate instruction. A

compensation committee comprising two

directors has also been established to assist the

board over the employment terms of the CEO and

the strategy and main principles for remunerating

the group’s senior executives. This committee

comprised Merete Haugli and Carl Erik Krefting as

at 31 December 2021. It is again governed by a

separate instruction, and it consists of members

who are independent of the group’s executive

management.

A board evaluation of its own work and expertise

was conducted in 2019. This covered the

composition of the board as well as how the

directors’ function both as a group and

individually. A new evaluation is planned for 2022.

The findings of the evaluation will be reported to

the shareholder. Guidelines on conflicts of

interest are included in the instructions for the

group’s board, and they ensure that the directors

inform the board if they have a significant direct

or indirect interest in an agreement being entered

into by the group. To avoid unintentional conflicts

of interest, the group has drawn up an overview

which identifies the various roles of its directors,

the offices they hold and so forth. This overview is

updated as and when required and in the event of

changes in the board’s composition.

Pursuant to the group’s ethical guidelines, no

employee must work on matters in which they

have a personal interest or where such an interest

could be perceived to exist. Ethical guidelines also

apply to directors when they represent Norwegian

Property. The board and the executive

management must ensure that transactions with

close associates (related parties) take place on an

arm’s length basis. Note 25 to the consolidated

financial statements details transactions with

close associates (related parties). Financial

relationships related to the directors and

executive personnel are described in notes 21 and

22.

10 Risk management and internal control

Risk areas and internal control environment

Through its business activities, Norwegian

Property manages considerable financial assets

which are exposed to substantial risk factors, such

as the money market and the letting market. Risk

Annual report 2021 - Norwegian Property ASA

Corporate governance Page 84

associated with development projects was greater

a few years ago, but now it is considered to be

small. The group’s management model is based

on an appropriate delegation of profit

responsibility, clearly defined operating

parameters and effective internal control.

The overall goals have been established and the

group’s strategy is updated in annual board

meetings. On the basis of the strategy, the values

base, ethical guidelines and guidelines for

corporate social responsibility, the board has

established general instructions which specify the

authorisations for delegating responsibility to

defined roles in the organisation. Furthermore,

policies have been established for control and risk

management in the most important risk areas,

such as operations, finance and sustainability.

Operational risk related to the award of contracts

and renegotiation of leases, is followed up on in

accordance with the established guidelines and

authorisations. Operational risk related to

property management is handled through

routines for day-to-day operation, compliance,

HSE work, energy efficiency and other climate-

related actions. Financial risk is managed in

accordance with the group’s financial policy.

The board is responsible for seeing to it that the

business, financial reporting and asset

management are subject to reassuring controls.

Based on the overall policies, governing processes

and routines have been established for day-to-day

management. Steering documents, such as ethical

guidelines and guidelines for corporate social

responsibility are updated by the board on an

annual basis. A subsequent annual review on the

Web ensures that the content of the steering

documents is made known to all employees.

These documents also contain whistle-blower

routines to ensure that the board is informed of

any breaches of the guidelines or any illegal

action.

In connection with its annual review of the

group’s strategy, the board reviews the most

important risk areas faced by Norwegian Property

and the internal controls established to deal with

and minimise these. The board is also briefed on

developments in the risks facing the group on a

continuous basis through the operating reports.

Reporting

The administration prepares periodic reports

which are considered at the board meetings.

These reports are based on management reviews

of the various parts of the business, and they

contain an update of the status for setting targets,

important operational conditions, financial

conditions and a description of the status in risk

areas. In addition, quarterly financial reports are

prepared and reviewed by the audit committee

ahead of the board meeting.

Financial conditions are followed up on through

periodic accounting reports and regular updates

of annual budgets and forecasts. Reporting also

includes non-financial key figures related to the

various business areas. In addition, risk

management includes the preparation of longer-

term projections of financial trends, where

assumptions are made about profits, cash flow

and balance sheet development. These

simulations provide management and board with

a basis for monitoring expected trends in central

key figures.

The group is managed on the basis of financial

targets related to such aspects as return on

equity. Special profitability calculations are made

when acquiring investment properties and when

launching development projects, based on

established routines and required returns.

A special review of the quarterly valuations of

investment properties is conducted by

management, and meetings are held with the

independent appraisers responsible for the

valuations where particular attention is paid to

market views and risk conditions. Separate

accounting documentation is prepared for

significant accounting items and transactions

which are not of a routine character. External

valuations of financial interest-rate derivatives by

the banks are quality-assured through the

Annual report 2021 - Norwegian Property ASA

Corporate governance Page 85

preparation of monthly internal value

assessments. All other balance sheet items are

reconciled and documented on a continuous basis

throughout the year. Significant profit and loss

accounts and accounts related to direct and

indirect taxation are also reconciled on a

continuous basis.

The interim reports and annual financial

statements are reviewed by the audit committee

ahead of consideration by the board. Risk

management and internal control are also

addressed by the board’s audit committee. The

latter reviews the external auditor’s findings and

assessments after the interim and annual financial

audits. Significant matters in the auditor’s report

are reviewed by the board.

11 Remuneration of the board of directors

Directors’ fees are determined by the general

meeting. These fees have been based on the

board’s responsibility, expertise and time taken as

well as the complexity of the business, and they

have not been related to the results. One director

was awarded options as compensation for

providing advisory services to the group in

addition to his directorship. The options were

exercised during 2021. It does not accord with the

NCGB code, but it was justified on the grounds

that the director in question had special expertise

and that it was in this group’s interest to utilise

this expertise over and above the person’s regular

duties as a director.

Other directors have not undertaken special

assignments for the group other than their work

on the board. Board approval is necessary before

any director can be offered such special

assignments which lead to extra remuneration.

Further details on the remuneration paid to

individual directors are provided in note 21 to the

consolidated financial statements. An overview of

the shares owned by the directors and their close

associates is included in note 22 to the

consolidated financial statements.

12 Salaries and other remuneration of

executive personnel

The guidelines for salary and other remuneration

to leading personnel were adopted by the general

meeting in 2021 and are available on the

company's website. The group’s guidelines for the

remuneration of senior executives are described

in note 21 to the consolidated financial

statements. This note also provides further details

about remuneration for senior executives.

These guidelines specify the main principles for

the group’s executive pay policy, and they have

been formed with the aim of ensuring that the

interests of shareholders and senior executives

coincide. The CEO has a personal share option

scheme (see note 22).

Profit-related remuneration in the form of a

bonus programme is based on the attainment of

goals for the group or for a department or

company in which the recipient is employed. Such

goals may comprise the attainment of various

improvement measures or financial criteria,

including the development of the group’s share

price. A ceiling has been set on the size of profit-

related remuneration for those employees

entitled to receive this.

13 Information and communication

Through the group’s established principles for

investor communication, available on its website

under principles and guidelines, the board has

determined guidelines for reporting financial and

other information. Based on openness and equal

treatment of players in the securities market, the

guidelines also cover communication with

shareholders outside the general meetings.

Reporting of financial and other information will

be timely and accurate, while simultaneously

being based on openness and the equal treatment

of the players in the securities market.

Information is published in the form of annual and

interim reports, press releases, stock exchange

announcements and investor presentations. All

the information which is considered to be

Annual report 2021 - Norwegian Property ASA

Corporate governance Page 86

significant for valuing the group will be distributed

and published via Cision and the Oslo Børs

company disclosure system, and the group’s

website exists in both Norwegian and English

versions.

Information is made available simultaneously on

the group’s website, where it is also possible to

subscribe to announcements. The main purpose

of this information will be to clarify the group’s

long-term goals and potential, including its

strategy, value drivers and important risk factors.

The group publishes a financial calendar every

year with an overview of the dates of important

events, including the AGM, publication of interim

reports and open presentations. This calendar is

made available as a stock exchange

announcement and on the group’s website as

soon as it has been approved by the board.

Norwegian Property complies with the

recommendations of Oslo Børs concerning the

reporting of investor relations information, to the

extent relevant for a company with listed bonds.

The applicable recommendation for such

reporting is available at

https://www.euronext.com/nb/markets/oslo.

14 Takeovers

The board has not prepared separate guiding

principles for responding to a possible takeover

bid since it wishes to be free, within the

constraints of the existing regulations, to react to

such an offer as it sees fit.

The group’s articles of association place no

restrictions on buying shares in the group. In a

takeover process, the group’s board and executive

management will seek to help ensure that the

shareholders are treated equally and that the

group’s business suffers no unnecessary

disruption. The board will give particular weight to

ensuring that shareholders have sufficient time

and information to be able to form a view of a

possible offer for the group’s business or shares.

The board does not intend to prevent or hamper

anyone from presenting an offer for the group’s

business or shares. It will take account of the

common interests of the group and the

shareholders in the event that possible

agreements with bidders are considered.

On 15th July 2021 Geveran Trading Co. Limited

("Geveran"), acquired 95,766,570 shares in

Norwegian Property ASA at a price of NOK 18.25

per share. Following the acquisition, Geveran held

618,867,613 shares in Norwegian Property ASA,

equalling 95.2 per cent of the shares and votes in

Norwegian Property ASA. Geveran offered to

purchase further shares in Norwegian Property

until 13th August 2021 at the same price, NOK

18.25 per share.

The board of directors of Geveran announced on

12 August 2021 that it would resolve a

compulsory acquisition of all the remaining shares

in Norwegian Property ASA not already owned by

Geveran (the "Minority Shares") effective from

end of trading on the Oslo Stock Exchange on 16

August 2021. The offered redemption price for

each Minority Share was NOK 18.25, which was

the same price at which Geveran had purchased

shares in the acquisition announced on 15 July

2021 and in transactions in the market thereafter.

The full redemption amount was placed on a

separate bank account in accordance with Section

4-25 of the Norwegian Public Limited Liability

Companies Act.

After the end of trading on the Oslo Stock

Exchange on 16 August 2021, the rights and

ownership of the Minority Shares were

transferred to Geveran. Accordingly, Geveran was

the beneficial owner of 100 per cent of the shares

in the Company (other than treasury shares held

by the Company itself).

A letter regarding the compulsory acquisition was

sent to all former shareholders of Norwegian

Property with known address and whose shares

had been acquired by way of the compulsory

acquisition. In addition, the compulsory

acquisition was announced in the Brønnøysund

Annual report 2021 - Norwegian Property ASA

Corporate governance Page 87

Register Centre’s electronic publication. Any

objections to, or rejection of, the offered

redemption price had to be made no later than

two months after the announcement.

After end of trading on 16 August 2021 Geveran

announced that it owned 636,347,425 shares in

Norwegian Property ASA, representing

approximately 98.88 per cent of the share capital

and voting rights (excluding treasury shares held

by the Company itself). Geveran resolved a

compulsory acquisition of all remaining shares in

the Company not already owned by it (the

"Minority Shares") with immediate effect.

The offered redemption price for each Minority

Share was NOK 18.25, which was the same price

at which Geveran has purchased shares in the

acquisition announced on 15 July 2021 and in

transactions in the market thereafter. The full

redemption amount has been placed on a

separate bank account in accordance with Section

4-25 of the Norwegian Public Limited Liability

Companies Act.

The rights and ownership of the Minority Shares

were automatically transferred to Geveran.

Accordingly, Geveran was from 16 August 2021

the beneficial owner of 100 per cent of the shares

in Norwegian Property ASA (other than treasury

shares held by the Company itself).

Settlement of the offer price to the minority

shareholders took place on or about Monday 23

August 2021.

It was resolved in an extraordinary general

meeting on 20 August 2021 to apply for delisting

of the shares in Norwegian Property ASA Property

ASA from the Oslo Stock Exchange.

15 Auditor

An audit committee of three directors has been

appointed. This committee is intended to support

the board in the exercise of its responsibility for

financial reporting, internal control, auditing and

overall risk management. Its work is governed by

an instruction. The group’s auditor,

PricewaterhouseCoopers AS, conducted the

following work during 2021 in relation to fiscal

2021.

- Presented the audit plan for 2021.

- Presented the additional report to the

audit committee of the audited entity.

This report covers the requirements in

the Auditors Act § 12-1, cf. regulation

(EU) No 537/2014.

- Attended board meetings considering the

annual report, reviewing possible

significant changes in accounting

principles, assessing significant

accounting estimates as well as

considering all cases where possible

disagreements had arisen between the

auditor and executive management.

- Conducted a review, together with the

board, of the group’s internal control

systems, including the identification of

weaknesses and proposals for

improvements.

- Held a meeting with the board without

the presence of the executive

management.

- Confirmed that the requirements for the

auditor’s independence were fulfilled,

and they provided an overview of

services other than auditing which have

been rendered to the group.

PricewaterhouseCoopers attended three

meetings with the audit committee, which

included reviewing the main features of the plan

for executing the audit for the year and

presenting results from the audit.

Pursuant to the instruction for the board’s audit

committee, the use of the auditor for substantial

assignments other than ordinary auditing services

must be considered and approved by the board.

The board reports annually to the AGM on the

auditor’s overall fees, broken down between audit

work and other services. The AGM approves the

auditor’s fees for the parent company.

Annual report 2021 - Norwegian Property ASA

Sustainability report Page 88

Sustainability report

Norwegian Property is experiencing increasing

interest from investors and tenants in the

environmental, social and corporate governance

(ESG) area. Investors and analysts are showing

interest in its strategy for and results from efforts

to reduce energy consumption and carbon

emissions. Tenants are eager to report their own

emissions and request figures from the group.

The main focus in 2021 has been on COVID-1

9 and

how to avoid infection among employees, tenants

and visitors to the group’s properties. Several new

ESG reporting requirements have been imposed in

the legislation. Norwegian Property has an

ambition to carry out its climate reporting in

accordance with the standard from the Task force

on Climate-related Financial Disclosures (TCFD). It

is also working to meet the future requirements in

the EU taxonomy for sustainable activities.

The board adopted the current s

trategy in

February 2020. This is based on four of the UN’s

sustainable development goals (SDGs).

SDG 8: Decent work and economic growth was

chosen because it fits well with the group’s ethical

guidelines. Norwegian Property will work to

combat corruption, discrimination and social

dumping. It will help to ensure that more young

people secure apprenticeships and/or summer

jobs, both internally and with its suppliers, and it

will work to achieve an organisation with diversity

and without discrimination.

SDG 11: Sustainable cities and communities was

chosen because this accords very well with both

Norwegian Property’s business and its values. The

areas where it owns property must be secure and

accessible to all. The group will choose sustainable

solutions for operating and developing its

buildings, and it will make an effort to protect the

historical cultural heritage by preserving its

historic and listed buildings.

SDG 13: Climate action to halt global warming is a

goal which Norwegian Property has pursued

actively since 2011. The group works continuously

to reduce energy consumption and convert to

cleaner energy sources in its buildings, like the

energy centre at Aker Brygge. It also works on the

degree of waste sorting in the buildings.

SDG 14: Life below water was chosen because of

the proximity of Aker Brygge to the fjord and the

Nydalen properties to the river. Therefore, the

group wishes to ensure there is clean water

around the buildings, marina and outdoor areas. It

wants to help reduce waste in the sea and

constantly studies how it can operate the most

sustainable possible marina.

Overall guidelines

The strategy is also based on the guidelines for

CSR which are updated and adopted by the board

on an annual basis, most recently in March 2022,

and published at www.npro.no. Their purpose is

to ensure that CSR is exercised in accordance with

the approved base values and ethical guidelines,

the guidelines for corporate governance, and the

group’s long-term value creation for shareholders,

employees, customers and society. The guidelines

apply to all the employees of the group and to the

directors when they act on behalf of the group.

The board is responsible for ensuring compliance

with the guidelines. All significant breaches of the

guidelines must be reported to and followed up

on by the board.

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Sustainability report Page 89

Division of responsibility

The board has adopted the sustainability strategy

and has overall responsibility for establishing it.

Overall responsibility for implementing the

approved strategy throughout the organisation

and for ensuring compliance with it rests with

Bent Oustad, the group’s CEO.

The operations organisation – commercial

management, operation and maintenance

(CMOM), headed by Bjørge Aarvold – is

responsible for prioritising and implementing all

measures related to energy consumption and

waste handling in the buildings which have

substantial significance for the group’s carbon

emissions. This also includes BREEAM-in-use

certifications.

The development department headed by Sindre

Kornrud is responsible for ensuring that new

building and major renovations are pursued in

accordance with the group’s sustainability

strategy.

Haavard Rønning, the group’s CFO, is responsible

for ensuring that routines and parameters which

ensure the group’s financial sustainability and

management are in place in the organisation.

In February 2021, Ane Grimsmo was appointed to

head the group’s work on sustainability, focusing

on the sustainability strategy, implementation of

efforts across departments and reporting.

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Sustainability report Page 90

Strategy for sustainability

To deal with these risks and opportunities, the group wants to comply with the UN SDGs with particular

attention devoted to the following targets towards 2025, and with 2019 as the base year.

SDG 13 Climate-related risk

management has been part of the

group’s financial planning process and

cross-disciplinary risk management

ever since 2011. The group has an ambition to

report according to the TCFD framework.

Where climate change is concerned, Norwegian

Property considers that its biggest impact takes

the form of energy consumption in the buildings

owned by the group and the types of building

materials used in its projects. But other important

considerations are the way the buildings are used,

how waste handling is organised and how tenant

employees travel to work in the group’s buildings.

Risks and opportunities with climate change

Norwegian Property has identified and assessed

climate-related risks and opportunities according

to the TCFD framework. Such risks and

opportunities are categorised as physical and

transitional risks and opportunities related to

climate change. Substantive risks may lead to

increased capital expenditures or operational

costs, alternatively they may reduce future

income unless the strategy is adapted. A risk is

identified to be substantive when it influences the

way Norwegian Property does its business. Risks

and opportunities are described in more detail in

the table in the risk and risk management section.

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Sustainability report Page 91

Physical risks and opportunities posed by climate

change

1. Increased precipitation could lead to greater

maintenance and adaptation costs towards

2030.

Excessive water could produce flooding, and

heavy rain may give rise to leaks in facades and

roofs.

The risk also exists that water levels in

watercourses, such as the Aker River, could

cause flooding of adjacent properties.

2. Greater humidity means higher maintenance

costs related to cladding and ventilation.

3. Higher sea levels are considered less of a risk

for properties on the Oslo Fjord, given that the

Norwegian Water Resources and Energy

Directorate (NVE) estimates a rise of 46

centimetres. This is not expected to be a risk

until after 2050.

4. Temperatures are expected to change, with

warmer winters and cooler weather in

summer. This could represent an opportunity

for reducing cost because the need for energy

for heating in winter and cooling in summer

will decrease.

Transition risks and opportunities are divided

into market and regulatory components.

MARKET RISK (INCLUDING REPUTATION):

1. Increased demand for more environment-

friendly premises is a trend beginning to

emerge in the market.

2. Environmental standards from investors will

eventually become more demanding. That

applies to investors in both bonds and shares.

Green bonds also offer opportunities. The EU

taxonomy for sustainable activities is also

expected to affect the financial markets.

3. Environmental standards from banks will

become stricter. Stiffer requirements for

securing financing will be set here. At the same

time, however, green loans offer opportunities

for lower margins and a larger investor base.

4. Insurance premiums can increase if damage

from climate change becomes extensive.

5. Technology risk is present. Keeping abreast of

technical developments for energy solutions

and building standards will be important.

Opportunities also exist for more energy-

efficient solutions with new technology.

6. Reputational risk is significant as climate-

related awareness spreads.

REGULATORY RISK:

1. Government requirements and permits in

such areas as building standards, traffic and

infrastructure are expected to become stricter,

and taxes could rise in line with increased

public spending.

2. A car-free central zone in Oslo offers an

opportunity if Aker Brygge remains on the

fringe, as it is today, but could be a risk if the

zone is extended further out. Consumers and

office tenants are expected to adapt to the

changes and thereby change their accustomed

travel patterns. This is something the group

must also adapt to.

In relation to the identified risks and

opportunities, Norwegian Property has quantified

what is viewed as a substantive financial impact.

Norwegian Property has defined impact levels for

one-time incidents in the following intervals,

where high-impact and medium-impact are

considered substantive:

• Low impact < NOK 50 million

• Medium impact = NOK 50-200 million

• High impact > NOK 200 million

Some impacts could be recurring and are defined

in the following intervals, where high-impact and

medium-impact are considered substantive:

• Low impact < NOK 5 million annually

• Medium impact = NOK 5-35 million

annually

• High impact > NOK 35 million annually

Scenario analysis

When determining what risks to include in the

scenario analysis, the most significant risks were

evaluated, in addition to TCFD’s

recommendations of including scenarios that

Annual report 2021 - Norwegian Property ASA

Sustainability report Page 92

explore alternatives that will significantly alter the

basis for business-as-usual assumptions in a

changing environment and society due to the

implications of climate change.

Based on Norwegian Property’s evaluation, the

following transitional risks have been included:

• The reputational risk of not keeping up with

society’s expectations in terms of a climate-

related focus and, therefore, not being viewed

as an attractive provider of office spaces.

• The risk of carbon pricing mechanisms

becoming more stringent and changes in

energy prices which will increase operational

costs.

Furthermore, the following physical risk has been

included:

• The risks related to higher global

temperatures which will trigger more

frequent extreme weather events and

chronical weather patterns such as storms,

heavy precipitation, flooding, sea rise etc.

The following climate-related opportunity has also

been included in the scenario analysis:

• The opportunity of being a front runner in

terms of energy efficient buildings and

attractive office locations (e.g. close to public

transportation).

SCENARIOS

The presented scenarios are descriptions of

hypothetical, plausible futures (not forecasts) that

help companies to answer the question of “what

would be the potential implications for our

strategy if the future, as described in a scenario,

came to pass”.

The assessed scenarios are mainly based on

existing publicly available scenarios:

WELL-BELOW 2°C SCENARIO: TRANSITION RISK

INCREASE

• IEA World Energy Outlook (WEO) 2021

i. IEA Sustainable Development Scenario

(SDS)

ii. IEA Net Zero Emissions (NZE)

BUSINESS-AS-USUAL 4°C SCENARIO: PHYSICAL

RISK INCREASE

• IPCC 5th (RCP 8.5) and 6th AR (SSP5-8.5)

• Business-as-usual (BAU) Scenario

The two scenarios inform the identified Transition

risks and Physical risks:

• Transition risks are related to the financial risks

of not being prepared for the socio-economic

changes of a world striving to meet the Paris

ambition of limiting global warming to well-

below 2°C.

• Physical risks are related to the financial risks

of not being prepared for the physical changes

of a world where ambitious climate policies fail

or fall short, and the global warming of the

world pushes towards 4°C.

The scenarios have been selected to test

Norwegian Property’s resilience, and to better

understand the future strategic and financial

impacts in both favourable and non-favourable

scenarios. Both medium- (2030) and long-term

time horizons (2040-2060) were taken into

consideration. The defined reports from the IEA

and IPCC have functioned as the main sources of

information for the analyses of both transition-

and physical risks, with supportive input from

geographical-specific and industry-specific reports

and articles.

NARRATIVE WELL-BELOW 2°C (RCP 2.6/SSP1-2.6 &

IEA SDS AND NZE)

In this scenario, we assume a rather orderly

transition to limit global warming to well-below

2°C. The scenario assumes a rise in climate policy

ambition and coordinated, global climate action

to start gradually in immediate future. The well-

below 2°C scenario is dominated by transitional

risks and opportunities. Moreover, the well-below

2°C scenario assumes that global CO2-emissions

peaked in 2020 and decline fast. A high carbon

Annual report 2021 - Norwegian Property ASA

Sustainability report Page 93

price is introduced in most economies, and global

power is mostly generated using renewables. Due

to low demand, fossil fuel prices are low.

Customers and investors are increasingly

becoming climate-conscious and demand more

sustainable products from all companies.

To meet the goals set in the Paris Agreement,

limiting global warming to well-below 2°C, new

and more stringent regulations will emerge. It is

very likely that this will lead to an increase in

regulations directly impacting Norwegian Property

when the world transitions to a lower-emission

economy. In Norway, policy assumptions include

(but are not limited to):

• Full implementation of the Green New Deal,

updated to NDCs and 2030 Climate and

Energy Framework, reducing GHG emissions

to 55 per cent below 1990 levels.

• Long-term strategy for climate neutrality by

2050.

• Increased carbon taxation

The Norwegian government submitted an

updated Nationally Determined Contribution

under the Paris Agreement in February 2020. The

new and enhanced climate target is to reduce

greenhouse gas emissions by at least 50 per cent,

and towards 55 per cent by 2030 (excluding

carbon uptake by forests), compared to 1990

levels, in alignment with the EU’s decision to

strengthen its 2030 target. Through the EEA and

Norway Grants, Norway supports social and

economic cohesion in Europe. A substantial share

of the funds is aimed at protecting the

environment and developing innovative green and

blue economies in the beneficiary states. What

the implications of the Commission’s ‘Fit for 55

package’ are for Norwegian companies is yet to be

determined. However, Norway has stated that for

the next financing period of the Grants, Norway

intends to emphasise even further on

interventions that can underpin the core

objectives of the European Green Deal.

RISK AND OPPORTUNITY: REPUTATION

In a future where consumers focus on

sustainability when making choices, it becomes

essential to not only be aligned with current laws

and regulations, but to be a front runner. Because

companies can attract customers by having good

reputations but also promote scepticism through

a bad reputation, the climate-related reputational

factor for Norwegian Property can be considered

as an both a risk and an opportunity.

Due to consumers’ willingness to prioritise

sustainability, NPRO’s buildings that are close to

public transportation in addition to having a high

energy efficiency, and access to local renewable

energy will be sought after and can maintain a

higher rental price. A higher rental price

throughout NPRO’s building portfolio would

provide NPRO with increased income. In

comparison, if NPRO’s buildings that are average

or below average in terms of energy efficiency

(regardless of access to public transportation), the

rental prices might have to be reduced to attract

tenants, and due to increased energy

consumption and, therefore, higher energy costs

for tenants.

RISK: ENERGY COST AND CARBON PRICING

MECHANISMS

An increase in both regional and national industry

specific regulations might impact Norwegian

Property financially through increased operating

costs.

Power prices are expected to be higher in Norway

(and Europe) than what has been seen

historically. We are in a time of major changes in

the energy systems in Europe and in the last

couple of years we have seen changes that are

likely to have an impact on the power prices in the

long run. The EU decided to raise its emission

targets for 2030 and submitted proposals for

changes in regulations to achieve this. This has

already contributed to raising the CO2 price

significantly and had a clear effect on power

prices in Norway in 2021, as countries and

companies are demanding more renewable

energy. The increased exchange capacity between

the Nordic countries and Europe is also impacting

the power prices. Power prices will become more

volatile, and the average energy price will be 50

ore/kWh towards 2040. Due to the increased

Annual report 2021 - Norwegian Property ASA

Sustainability report Page 94

demand for renewable energy and the increased

energy prices, one can assume that increased

power production will become more attractive to

the suppliers. However, it is expected that the

energy consumption will increase more than the

energy production until 2030 as there are long

planning- and licensing processes for new power

production. This assumption has been accounted

for in NVE’s energy marked analysis, and it is

projected that the energy price will be lower than

50 øre/kWh in the longer term (after 2040) as

renewable power production in Europe increases.

In 2021, Norwegian Property had an electricity

consumption of 62,667 MWh in the common

areas of its buildings. With energy prices more

than doubling in the coming years, NPRO’s

operational costs are likely to increase in a

medium timeframe. Similarly, NPRO’s tenants will

have increased operating costs, which might

affect how new lease agreements are defined in

terms of rent. It is challenging to predict how such

a steep power price increase might change the

market dynamics and tenants’ willingness to pay

rent at the same rates as NPRO has defined in its

agreements as of today. Increased prices on

energy might also lead to increased investments

in more energy efficient buildings, or in upgrading

buildings that are already in NPRO’s portfolio.

Both of which might mitigate the risk of tenants

demanding lower rent due to higher power prices.

About 40 countries and more than 20 cities, states

and provinces already use carbon pricing

mechanisms, with more countries planning to

implement them in the future. The choice of the

instrument will depend on national and economic

circumstances. However, as carbon pricing is seen

as a key policy mechanism to curb and mitigate

the dangerous impacts of greenhouse gas

emissions and drive investments towards cleaner

and more efficient alternatives, the EU

Commission has stated that the EU ETS

allowances in the market will be reduced by 61

per cent by 2030, compared to 2005.

Furthermore, the Commission proposes to apply

emissions trading in other sectors through a

separate new system, to build on the result of the

current trading system.

For society to be able to limit global warming to

well-below 2°C it will become more expensive to

pollute. An increased carbon price for activities

already included in the EU ETS pose a modest risk

to Norwegian Property. Seeing that the

construction of buildings is not a substantial part

of NPRO’s business model as of today, an increase

in carbon pricing will not constitute a considerable

extra cost for NPRO in the medium- or long-term.

However, new sectors might be included in the

mandatory carbon pricing mechanisms. The

carbon price for companies subject to the EU ETS

is expected to increase in advanced economies

between 2025-2040, reaching NOK 1,300/tonne in

2040 in the Sustainable Development Scenario. In

the Net Zero Emissions Scenario, carbon prices are

in place in all regions, rising by 2050 to an average

of NOK 2,200/tonne (USD 250). The Norwegian

Government recommends companies and

activities not subject to the EU ETS to use a price

of NOK 2,083/tonne in 2040 when putting a price

on their emissions. Moreover, the Norwegian

Government recommend companies conducting

sensitivity analyses to test future resilience

against climate change by using a price on carbon

of NOK 5,940/tonne in 2040 and NOK 9,029/tonne

in 2050. If activities within commercial real estate

are included in the mandatory carbon pricing

mechanisms, NPRO’s operating costs will increase.

Narrative business-as-usual 4°C (RCP 8.5/SSP5-

8.5 & BAU)

The 4°C business-as-usual scenario is dominated

by increasing physical risks, due to a lack of

coordinated policy actions to limit climate change.

In this scenario, economic growth is preferred

over climate action overconsumption of resources

continues. The world is still dependent on fossil

fuels and energy intensity continues to be high.

The growth of greenhouse gas emissions will

cause further warming and long-lasting changes in

all components of the climate system, increasing

the likelihood of severe, pervasive and irreversible

impacts for people and ecosystems. Consumers

are not prioritising climate in their decision

making. The ambition for economic growth is not

met, as GDP losses occur due to increased

physical risks as the temperatures rise. As the

globe is warming up, the severity and frequency

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of extreme weather events are increasing. The

probability of compound flooding events (e.g.

storm surge, extreme rainfall and/or river flow)

has increased globally in later years and will

continue to increase due to both sea level rise and

increases in heavy precipitation, including changes

in precipitation intensity and frequency of

occurrence. The median projections for Norway

indicate an 18 per cent increase (span: 7 to 23 per

cent) in annual precipitation towards the end of

the century, and a doubling of days with heavy

precipitation. Preliminary analyses suggest that

rainfall intensity for durations of a few hours may

increase by more than 30 per cent.

RISK: CHRONIC AND ACUTE WEATHER EVENTS

Rain flooding and landslides because of heavy

precipitation as well as increased storm surge

levels could impact Norwegian Property’s

operations due to the geographical locations of

most of its buildings (i.e. Akerselva and Aker

Brygge). However, the potential financial impact is

evaluated to be low in the medium term due to

NPRO’s insurance. In the long-term perspective,

the cost might be somewhat higher if insurance

premiums increase due to more frequent extreme

weather events.

Increased intensity and frequency of heavy rainfall

(including rain floods) can result in more damages

to all NPROs buildings, both in terms of exterior

and moisture damages. Akerselva is a regulated

river and is, therefore, not a big risk in terms of

flood water flow for NPRO’s buildings located in

Nydalen. Nevertheless, heavy rain over longer

periods of time might still overflow Akerselva to

the point where it affects buildings nearby to

some degree. None of NPRO’s current buildings

are in areas with increased danger of landslides

(including quick clay). However, if NPRO seeks to

acquire or build new buildings, the risk of

landslides should be considered. Of the buildings

NPRO own which is located at Aker Brygge,

Dokkbygget is the only building that might be

affected by storm surge levels in the long term,

which could have a financial impact due to water

damage.

References are available on page 123.

Targets

Norwegian Property has set some quantitative

targets for 2019-25 These are:

• a 30-50 per cent reduction in energy

consumption for renovated buildings

• a five to 10 per cent reduction in energy

consumption for the existing portfolio

• a 10-20 per cent reduction in CO

2

equivalents

(CO

2

e) emissions

• a 60-65 per cent proportion for sorted waste.

Developments in energy consumption per building

are measured and reported annually to the board.

The status for the three years to the end of 2021

is presented in the table, where reductions and

increases are measured in relation to the year

before.

Climate accounting 2021

Total energy consumption and carbon emissions

in the table above include Snarøyveien 30 with a

full year in 2021, but only the month of December

in 2020. Vinslottet and Lille Grensen 7 are not

included in 2019.

The total use of energy in 2021 increased

substantially compared to 2020 because of the

acquisition of Snarøyeien 30 in December 2020. In

addition, the winter months of 2021 were very

cold, which made the need for heating higher

than normal. Both 2020 and 2021 had lower

activity in the properties than a normal year due

2021 2020 2019

Total consumption (MWh) 105,923 55,652 61,022

sqm 410,157 234,152 219,143

Energy consumption per sqm 258 238 278

Change from previous year (per cent) 9 15- 7-

Office (kWh per sqm) 214 171 191

Retail (kWh per sqm) 323 341 438

Restaurant (kWh per sqm) 610 630 854

Total CO

2

e-emission (tonne) 3,038 2,653 3,046

sqm 410,157 234,152 219,143

CO

2

e-emissions (kg per sqm) 7 11 14

Change from previous year (per cent) 35- 19- 15-

Office (kg per sqm) 4 6 6

Retail (kg per sqm) 5 10 13

Restaurant (kg per sqm) 24 20 28

Proportion of waste sorted (per cent) 60 58 56

Customer satisfaction index 78 79 78

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Sustainability report Page 96

to the COVID-19 pandemic. Energy consumption

per square meter also increased from 2020 to

2021, due to the acquisition of Snarøyveien 30

with a data centre which uses a lot of electricity.

Excluding the Snarøyveien 30 consumption leaves

the energy consumption per square meter almost

unchanged from 2020. The target of 5-10 per cent

annual reduction was not met.

The total amount of carbon emissions increased

from 2020 to 2021 because of the enlarged

property portfolio. Breaking down the emissions

per square meter shows a decrease of 33 per

cent, which is above the target of 10 to 20 per

cent. This was partly due to increased use of

renewable energy in the production of electricity

and central heating. Another effect is the

increased proportion of central heating in the

group’s energy mix, as central heating causes less

carbon emissions than electricity.

Both energy consumption and carbon emissions

are split into three categories – offices, retail and

restaurants. These KPIs are used to make sure

that the figures are comparable from one year to

another, and target for reduction of energy use

and carbon emissions are measured using these

KPIs.

Aker Brygge represents a significant proportion of

the group’s building inventory. This is a complex

area where many different types of activity are

pursued for large parts of the day, compared with

traditional office premises which are in use only

within ordinary office hours. That explains why

Norwegian Property’s average energy

consumption could seem high compared with

other property companies. The group is,

therefore, more concerned to follow

developments in its own usage over several years

than to draw comparisons with other players. In

addition to that is the effect of the number of

hours the buildings are in use during the day. That

helps to explain why NPRO has some high average

figures.

The base data are obtained from the group’s

energy suppliers and the energy monitoring

system (EOS) in the properties. Cemasys has

provided support in processing and verifying the

figures for energy consumption and carbon

emissions.

ENERGY MIX

The group’s energy cons

umption is a mix of

electricity, district heating and the energy centres’

production in Aker Brygge and Fornebu. One of

the ways to reduce carbon emissions for the

property portfolio is to replace energy sources

with more renewable energy sources. With the

acquisition of Snarøyveien 30, the mix of energy

was altered. Electricity was reduced from 73 per

cent to 57 per cent, and the district heating

increased from 13 per cent to 30 per cent. The

group’s own production of renewable energy in

the Energy Centres in Aker Brygge and Fornebu

doubled, while the proportion of total energy

consumption was nearly unchanged. The use of

propane mainly takes place in the restaurants’

kitchens. Due to the pandemic, they were closed

several months, and the consumption of gas

decreased.

SOURCE OF CARBON EMISSIONS

Annual report 2021 - Norwegian Property ASA

Sustainability report Page 97

Total carbon emissions per square meter came

down 33 per cent. Electricity is the group’s main

source to carbon emissions and constitute about

57 per cent of all emissions in 2021. The

renewable component in the electricity mix

(Nordic mix) was enhanced from 2020 to 2021, so

even though the use of electricity rose by 52 per

cent following the acquisition of Snarøyveien 30,

the carbon emissions only increased by 15 per

cent. Carbon emissions from district heating is low

and account for about 10 per cent of the total

emissions while the consumption accounts for

about 30 per cent (not including the energy

centre).

Emissions from waste constituted approximately

19 per cent of the total emissions in 2021. Of this,

90 per cent (525 tonnes) came from waste not

sorted.

Total consumption and carbon emissions cover all

energy use in the group, and include scopes 1, 2

and 3. For a complete list of the properties

included, see the climate report available at

www.npro.no. The figures broken down between

offices, shops and restaurants only relate to these

types of premises and their associated energy

consumption.

ENERGY-SAVING MEASURES

Every time a building is to be renovated, a

detailed analysis of such aspects as energy and

ventilation is carried out in consultation with

experts in various fields in order to determine

how energy consumption and CO

2

e emissions can

be reduced.

GREEN LEASES

Energy savings in leased buildings can be achieved

through “green” leases. Such green clauses allow

Norwegian Property to invest in environmental

measures during the life of the lease if the sum of

savings from reduced energy consumption and

increased depreciation of the investment cuts

service charges for tenants.

ENERGY CENTRE AT AKER BRYGGE

Three of the buildings at Aker Brygge are

connected to a common energy centre, which

became operational in summer 2014. The centre

delivered energy corresponding to 316 per cent of

the energy input in 2021, and this was used for

heating and cooling. The figure below shows

developments in the share of produced energy

supplied to the buildings compared with the

energy input to the centre over the past four

years.

Continuous efforts are being devoted to efficiency

improvements. The energy centre is much more

efficient for cooling than heating. Efficiency was

therefore good in 2018 because of a particularly

long, hot summer with a high output of distance

cooling. Temperatures in 2019 were closer to

regular levels, while 2020 was characterised by a

low level of activity in the buildings because of

lockdowns in the March-April and October-

November periods when heating is required. Most

activities were opened up during the summer, and

cooling was at a normal level. Overall efficiency

ended up at a very high level in 2020. In 2021, the

very cold winter months contributed to a high

production of heating and thereby lower

efficiency.

The centre generated and delivered 7,241 MWh in

2021 compared with 6,165 MWh in 2020.

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Sustainability report Page 98

Another energy centre in Aker Brygge with a

seawater pump delivers energy to four other

buildings. This is an older energy centre, and it is

estimated that it produces approximately 1.9

times as much energy as it uses. In 2021, the

production was estimated to 5,3410 MWh.

SNARØYVEIEN 36

The property was the first to be certified to

BREEAM-in-use by Norwegian Property, and it was

graded Excellent in spring 2020.

New heat pump technology was installed in 2020

as part of the ongoing energy-saving programme

at Snarøyveien 36. The new solution produced

901 600 kWh of renewable central heating and

cooling in 2021, which constitutes 15 per cent of

the property’s energy consumption.

WASTE SORTING

Norwegian Property has placed a special focus on

waste sorting in 2021. CO

2

e-emissions from waste

is second most important source to emissions for

the group. Approximately 19 per cent of carbon

emissions in 2021 (22 per cent in 2020) came from

waste, and 90 per cent of these emissions were

due to waste which had not been sorted. Hence,

increasing the degree of waste sorting is an

important measure. The project includes, among

other things, the following initiatives:

• Updated information to all tenants about how

to sort waste.

• Together with our tenant, BNP, arranging a

Green Week for tenants at Aker Brygge with

focus on waste.

• Staffing of waste rooms to assist with the

sorting.

• In collaboration with tenants and the garbage

removal company, work has been done to

improve signs and equipment to ease waste

sorting.

The target for this strategy is a minimum level of

waste sorting of 60-65 per cent. Attention has

been concentrated on achieving an increase at

Aker Brygge, since the buildings account for over

72 per cent of the waste in 2021.

Since 2011 the proportion of sorted waste at Aker

Brygge has boosted from 15 per cent to 58 in

2021. It is hard to say if the 2020 and 2021 figures

are representative, since they were clearly lower

than in earlier years owing to the lockdown.

CARBON DISCLOSURE PROJECT (CDP) REPORTING

Norwegian Property achieved a B ranking in the

2020 reporting. The group has been filing CDP

reports since 2011, and it wants to continue doing

so.

GREEN BOND

Norwegian Property published its Green Bond

framework with a Medium Green score from

Cicero, and it issued its first Green Bond in June

2021. The Green Bond Framework is available in

the company’s webpage.

Clean water in the fjord

SDG 14 Given its proximity to the fjord

at Aker Brygge, Norwegian Property

feels it is important to help keep the

sea clean. The group has a financial

interest in the shoreline, since the properties on

The energy centre's efficiency 2021 20

20 2019

Energy consumption 2,295,082 1,674,814 2,169,363

Produced energy delivered to the buildings 7,241,743 6,165,046 7,163,111

Production vs consumption 3.16 3.68 3.30

Amount of waste tons 2021 2020 2019

Aker Brygge tons 1,853 1,924 2,661

Other CBD tons 80 38 29

Nydalen tons 134 156 192

Vinslottet tons 109 132 NA

Fornebu tons 384 47 63

Sum from operations tons 2,560 2,297 2,944

Proportion of waste sorting 2021 2020 2019

A

ker Brygge

per cent

58 58

58

Other CBD

per cent

72 62

92

Nydalen

per cent

53 41 32

Vinslottet

per cent

55 70

NA

Fornebu

per cent

68 68 59

Sum from operations per cent 60 58 56

Annual report 2021 - Norwegian Property ASA

Sustainability report Page 99

the water’s edge benefit from an idyllic location –

particularly in summer. The group’s goal is also

that the marina will be a driver and facilitator for

environment-friendly pleasure-boating.

The electrified Aker Brygge Marina provides hire

of electrically powered boats and stand-up paddle

(SUP) boards in addition to conventional marina

operations.

Norway’s first electric boat marina was opened at

Aker Brygge in June 2021. The chargers were

installed by BKK. Kruser offered membership in an

electric boat pool and had eight berths in the

electric boat harbour. Instead of owning your own

boat, you as a member can reserve and use an

environmentally friendly electric boat. With plenty

of space, minimal engine noise and long range,

the boats are well suited for everything from one

person to larger groups. The boats are emission-

free in use, and they emit neither exhaust nor

environmentally harmful antifouling.

GreenBoats arranged the Fjord Clean Up

campaign, where volunteers were invited to

weekly harbour clean-up events with electric

boats, kayaks and SUP boards provided for them.

Afterwards, the participants were welcomed to

use the sauna and enjoy some hot soup.

Norwegian Property has collaborated for several

seasons with various players on rubbish collection

from the harbour. Over the past three years, the

Seabin project has recovered some five tonnes of

waste. While two tonnes were collected in 2019,

the amount in 2020 was reduced to one tonne

because the system did not work for a time owing

to a lack of spare parts. The Seabin was back in

full capacity in 2021, and it collected

approximately two tonnes of waste.

Meeting places to encourage engagement

SDG 11 Norwegian Property’s vision

of creating meeting places and

relationships which encourage

engagement drives a continuous

commitment to providing secure and accessible

outdoor spaces for tenants and visitors. The

group’s buildings will primarily occupy central

locations close to public transport hubs, and it will

preserve old buildings and cultural heritage.

Sustainability at Aker Brygge

Aker Brygge has been pedestrianised for many

years, and Norwegian Property believes this has

helped to make it an attractive area for the city’s

residents and tourists to spend time in. The group

also pays attention to accessibility for all groups

through universal walkways and snow clearance.

The group has rented facilities at Aker Brygge to

the Microgreens project, which pursues urban

farming. Sprouts, salads, herbs and mushrooms

are being produced for sale as local ingredients to

the restaurants at Aker Brygge. Some of the

sprouts are grown in a stand in the atrium of the

Terminalbygget which is accessible for visitors to

see. In 2021, despite the lockdown, the sales of

Microgreens amounted to NOK 370,000. When

society opens and activity is back to normal, the

sales are expected to rise substantially.

Improving bio-diversity

In Fornebu, Norwegian Property have beehives

where approximately 160,000 bees produce 80 kg

of honey per year.

Norway’s first kiosk with an all-green façade was

opened at Aker Brygge in 2021. The kiosk was

covered by native vegetation for the Oslo area,

and it contains several pollinator-friendly flower

species.

Climate-positive park in Nydalen

On the old parking deck outside the canteen in

Sandakerveien 140, Norwegian Property plans to

establish a "green lung" that will be available to

the tenants in Nydalen. AsplanViak has been

engaged to create a concept for Oslo's first

recycling park that will include outdoor exercise

equipment, plants, green walkways, furniture with

focus on reuse, a greenhouse and art made by

local artists.

Through conscious choices of solutions, type of

vegetation and recycling elements, the park has

the potential to become a climate-positive park.

Annual report 2021 - Norwegian Property ASA

Sustainability report Page 100

Which means that the park stores more CO2 in

soil and vegetation than what is released upon

establishment. This will be the first documented

climate-positive park in Norway.

Sustainable travel to work

Norwegian Property has concentrated the

composition of its portfolio in three clusters: Aker

Brygge including the CBD, Nydalen and Fornebu,

in addition to Vinslottet (Wine Palace) at Hasle.

The properties are all located close to public

transport. Those in the CBD, Nydalen and Hasle

are located close to bus stops and the metro. The

properties at Fornebu are next to existing bus

stops and to a new stop on the planned metro line

to this area. That provides opportunities for

tenants to take public transport to and from work.

The group also offers cycle parking and cyclist

changing rooms in several of its buildings as well

as charging points for electric bikes where it has

car parks.

Growing investments are also being made in

charging points for electric cars. About 13 per cent

of the parking spaces at Snarøyveien 36 and in

Nydalen are now equipped with these.

The group has started a pilot project with the Otto

car-sharing programme. This initially involves a

few cars in Snarøyveien 36 at Fornebu. Due to the

lockdown, the interest has been low so far, but

some of the tenants are interested in pursuing

this solution when society opens up again.

Demand for parking in office buildings appears to

be decreasing slightly. Once the COVID-19

pandemic has ended, it will be clearer whether

this is a persisting trend. Other uses for parking

spaces are being explored.

BREEAM-in-use

The Snarøyveien 36 property was certified as

BREEAM-in-use Excellent in 2020, and the

Kaibygning 1 and Fondbygget were BREEAM-in-

use certified Very Good in 2021. The Snarøyveien

30 property is also certified as BREEAM-in-use

Very Good. Both tenants and investors are paying

growing attention to certified buildings, and

Norwegian Property will continue this work. The

target is to BREEAM in use certify all properties

within 2025.

Preservation of cultural heritage

Old buildings with historic value are found at Aker

Brygge, in Nydalen and Vinslottet at Hasle. The

group sees the value of preserving the

architecture and communicating this history when

creating an attractive and engaging area for

visitors and tenants. That target conflicts from

time to time with climate-related goals, since

improving energy efficiency is hard when windows

and facades are old and of lower quality than

today’s standard.

Community engagement

Norwegian Property is a proud sponsor of

Zuccarello Classic, The Zucarello Foundations main

target is to assure that all children and young

people are given equal opportunity to participate

in sports and physical activity – regardless of

background, ethnicity, place of residence and

family income.

In 2021, as in 2020, most planned community

arrangements were cancelled due to COVID-19.

Nevertheless, some adjusted arrangements took

place. At Aker Brygge, the following arrangements

were open for the public and free of charge:

Outdoor Christmas cinema, Pop-up concerts with

Norwegian artist, Christmas concert with the

“Sølvguttene” in addition to our participation in

Oslo Art Walk and the Oslo Fjord Light festival.

Creating engaging meeting places is Norwegian

Property’s vision. This applies both to the

properties and the outdoor areas. Aker Brygge

hosted the Mexican artist Jorge Marin’s exhibition

“The Reconstruction of Being” from august 2020

until September 2021. The exhibition is since

September 2021 to be found at the property

Snarøyveien 30.

In the outdoor areas of Vinslottet, “Kunst Kræsj”

has taken place as a Pop-up Exhibition through

2021. “Kunst Kræsj” presents young artists across

genres and forms of expression. The purpose is to

create an open and inclusive experience for a

wide audience, where leading young artists and

Annual report 2021 - Norwegian Property ASA

Sustainability report Page 101

talents are given the opportunity to exhibit their

works. There were in total seven unique

exhibitions that were changed every other month

throughout 2021.

Social conditions

SDG 8 This encompasses a number of

targets which are in line with

Norwegian Property’s base values

and ethical guidelines.

Combating corruption

Norwegian Property wants fair and open

competition in all markets, sets high standards of

personal and professional integrity, and does not

tolerate any form of corruption or bribery.

ETHICAL GUIDELINES

Efforts to combat corruption are pursued first and

foremost through the group’s work as a

responsible investor and owner, as a responsible

buyer and through implementing and following up

ethical guidelines. Its ethical guidelines provide

norms and rules which apply to all employees.

They also apply to directors when these act on

behalf of Norwegian Property.

The ethical guidelines have been adopted by the

group’s board and are renewed annually. All

employees must review the ethical guidelines

annually through a web-based solution and

confirm that they will comply with them. The

guidelines are published on the Norwegian

Property website.

Its personnel must not accept or make gifts which

could affect their own integrity or decisions or

those of others, or which could be perceived to do

so. Norwegian Property’s employees must not

work on behalf of the group on matters where

they have personal interests, or where others

could perceive such interests.

PROCUREMENT ROUTINES

Norwegian Property has prepared detailed

processes for procurement covering the whole

process from identifying a need to implementing a

purchase. They involve documented processes

and work-sharing intended to help limit

opportunities for corruption in connection with

procurement.

Suppliers are also required to have ethical

standards and attitudes comparable with those of

Norwegian Property. These companies represent

the group and, therefore, they must communicate

its core values. The following minimum standards

are set for suppliers and possible sub-suppliers:

• financial strength and the capacity to deliver

• a good history of compliance with legal

requirements (business conduct, no use of

unregistered workers and so forth)

• satisfy requirements for health, safety and the

environment (HSE), internal control and so

forth

• have ethical and environmental guidelines

which accord with Norwegian Property’s

strategy

• membership of the StartBANK register for

suppliers, where relevant.

StartBANK is a joint supplier register used by

purchasers in Norway’s construction, public

administration, insurance and property sectors to

support serious suppliers and provide updated

and checked supplier information. With 7,000

suppliers evaluated on the basis of predetermined

approval criteria, StartBANK provides an

equitable, open and secure solution for selecting

reliable suppliers. This gives suppliers the

opportunity to compete on equal terms,

contributes to the use of serious players, and

creates new business opportunities for both

purchasers and suppliers. StartBANK is being

continuously developed to meet the increasingly

demanding legal guidelines and requirements for

risk management in the construction industry.

Norwegian Property found no evidence of fraud,

corruption or attempted corruption in its business

during 2021.

Employee rights and social conditions

Norwegian Property is an expertise-driven

organisation and aims to be an attractive

employer where employees thrive. Active

Annual report 2021 - Norwegian Property ASA

Sustainability report Page 102

provision will be made for developing personnel in

order collectively to form a leading professional

team in the Norwegian property sector. When

recruiting staff, emphasis is given to combining

professional expertise and experience of the

property sector, while ensuring that personal

qualities contribute to an aggressive and efficient

organisation.

Continuous efforts are devoted to knowledge

development in the form of tailored training, so

that each employee can fully master their job and

develop in step with changing requirements.

Backed by individual development plans,

employee progress and training requirements are

followed up through job reviews and continuously

during the year. Based on goals for personal

development, employees can apply for financial

support to pursue further or continuing

education.

Contributions to a good working environment are

also sought through attractive premises, a

dynamic workplace and challenging assignments.

Norwegian Property conducts bi-weekly employee

satisfaction surveys to determine how employees

regard the group as a workplace and to identify

possible areas for development. The survey has

been ongoing among all employees since late

2019. The response rate for 2021 was 90 per cent,

which is considered good. The results show that

the job satisfaction is high, 8.2 out of 10 for the

organisation as a whole. Areas with the lowest

score are innovation at 7.3 and diversity at 7.5.

Equal opportunities and inclusion

Where equal opportunities and inclusion are

concerned, efforts are made to ensure that all

employees receive the same opportunities for

personal and professional development. New and

existing personnel will be treated equally

regardless of their gender, age, ethnic origin or

possible disabilities. The group does not accept

any form of discrimination – based on gender,

race, religion or orientation, for instance.

INCLUSION

Norwegian Property wants to provide job

opportunities for representatives from

disadvantaged groups. One of these is female

immigrants. The group has succeeded in providing

jobs to such individuals, as some of its

beneficiaries have later had secured permanent

jobs both in Norwegian Property as well as

outside of the company.

Another vulnerable category is young people in

education or training. Norwegian Property will

work here to secure apprenticeships by setting

requirements for its suppliers in the building

industry. Norwegian Property has also secured

one young female a permanent job during her gap

year as a Maintenance Technician.

Summer jobs will also continue to be offered in

the marina and the outdoor areas at Aker Brygge.

In 2021, we hired in total 15 young people, five

females and 11 males, in summer jobs.

EQUAL OPPORTUNITIES

The construction and property sectors are male-

dominated, which creates some challenges for

efforts to increase the female proportion in

certain posts. The group had 59 employees on 31

December 2021, compared with 51 a year earlier.

In total, that gives us 8 new employees in addition

to 3 employees which got promoted throughout

2021. Forty of the group’s 59 employees are male

and 19 are female. The executive management

comprised six people as at 31 December 2021,

including one woman. Annual salary in 2021

excluding the executive management team

specified in the annual accounts averaged NOK

795,000 for men and NOK 716,000 for women.

Maternity leave in 2021 amounted to 90 weeks in

total for three women, in addition to one man

who had five weeks paternity leave. Two females

are employed part-time. A total of 61 work-years

were performed in the group during 2021, up

from 57 in 2020.

At the date when the financial statements were

presented, the board comprised seven directors –

four male and three female.

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Sustainability report Page 103

HSE work

Norwegian Property observes the established

standards of working life, and it will comply with

all the requirements enshrined in the relevant

legislation. The group seeks to apply working

methods which ensure good working conditions,

with high standards of HSE. Day-to-day operations

take account of HSE considerations, which are

important for Norwegian Property because the

group is dependent on maintaining high standards

for the health and well-being of its employees in

order to succeed. Its strategy involves zero

tolerance of serious personal injuries suffered in

relation to Norwegian Property’s properties and

areas of responsibility.

Sickness absence is an important HSE indicator.

The total recorded for 2021 at Norwegian

Property was 3.7 per cent, while the target in the

group’s strategy is three per cent. With a

relatively low number of employees, however,

long-term sick leave will necessarily influence the

absence rate. Efforts to reduce sickness absence

include financial support for employees to

exercise and have massages, health insurance and

physiotherapy sessions to address their seated

posture. COVID-19 led to some increase in short-

term sickness absence.

Opportunities for employees to participate in

determining their own working day form part of

HSE work. The practical follow-up is conducted

through the working environment committee

(AMU), where representatives of employees and

management meet. The AMU deals with current

working environment issues and future plans

which could have substantial significance for the

working environment and so forth.

Human rights

Norwegian Property supports and respects

international human rights. Respect for the

individual represents a fundamental guideline for

the group. Everyone will be treated with dignity

and respect, without discrimination based on

gender, pregnancy, maternity or adoption leave,

care responsibilities, ethnicity, religion,

philosophy of life, disability, sexual orientation,

gender identity or gender expression. Children will

not be used as labour if it could harm their

education or development. When offering job

opportunities to young people this must be done

within the requirements of the Working

Enquirement Act. No use will be made of forced

labour.

As a property group with all its activities in

Norway, Norwegian Property does not face the

greatest human rights challenges in its everyday

operations. However, the suppliers it uses could

be subject to challenges, in part related to social

dumping. In the construction industry, the latter

could be associated with economic migrants

whose wages and employment conditions are

significantly worse than for national workers. The

greatest opportunities for Norwegian Property to

promote and respect human rights and help

prevent human rights abuses accordingly lie in

being a responsible purchaser of goods and

services. Through its ethical guidelines and by

acting as a responsible purchaser, the group seeks

to ensure that suppliers apply key principles which

accord with those of Norwegian Property.

Annual report 2021 - Norwegian Property ASA

Risk and risk management Page 104

Risk and risk management

The group has reviewed the risks and opportunities which it is exposed to. The results of this review are

presented in the table below.

Risk/opportunity and the

responsible executive

Description and timing

Strategy/measures

Changes to

developments in

2021

Financial conditions

Responsible: CFO

1. Fair-value changes for

the properties

ON-GOING

The fair value of the

properties is crucial for the

group’s balance sheet

The strategy is to own

high-quality properties

centrally located in

selected clusters in Oslo.

Four value drivers have

been identified, and

form the basis for

continuous work:

• letting

• management

• transactions

and finance

• development.

The share of the

portfolio under

development will

represent about five to

15 per cent of the space

over time.

The asset value of

office properties in

Oslo increased

markedly during

2021. Low vacancy

(particularly in the

CBD), rising rents

and low interest

rates have

contributed to a

good market.

For Norwegian

Property, both

investment in new

buildings and higher

valuations

contributed to rising

book values in 2021.

2. Interest-rate risk

ON-GOING

Interest charges represent

a large proportion of the

group’s total costs.

Interest-rate changes will

therefore affect both

profits and liquidity.

Policy of fixed interest

rates on more than 50

per cent contributes to

predictability for

interest-rate costs.

A sensible LTV ratio (45-

55 per cent) helps to

reduce the risk of very

high costs related to

possible interest-rate

increases.

Market interest rates

remained at a low

level through 2021,

but there are

indications that they

will rise, especially

because of higher

inflation. At the

beginning of 2021,

the 10-year interest

rate was 1.26 per

cent. It reached

almost two per cent

in December.

The hedging ratio in

2021 was

Annual report 2021 - Norwegian Property ASA

Risk and risk management Page 105

Risk/opportunity and the

responsible executive

Description and timing

Strategy/measures

Changes to

developments in

2021

approximately 70

per cent, which

helped to reduce the

risk to future cash

flow.

3. Access to external capital

ON-GOING

Refinancing risk is the risk

that insufficient capital will

be available when loans

expire.

Compliance with

covenants/terms is

important, and these must

be sufficiently tightly

drawn to secure financing

but also sufficiently

flexible to give the group

freedom of action.

The group’s main funding

source has changed from

bank loans to bonds the

last years. The refinancing

risk in the bond market

could be viewed as higher

than in the bank market.

The strategy for

reducing risk associated

with refinancing is to

use various financing

sources, raise loans with

long terms and spread

their maturity structure.

Norwegian Property

seeks to have fixed and

predictable loan terms

which give it adequate

freedom of action.

Maintaining good

relations with the main

banks is important to

reduce refinancing risk.

The group has issued its

first Green Bond of NOK

530 million in 2021. In

Q3 2021 the bond

market was very liquid,

and the group took the

advantage to refinance

some of the bonds

maturing in 2022.

The group has decided

to get an official credit

rating during first half of

2022.

Access to external

capital has been

good, and liquidity

and margins were

back to pre-

coronavirus levels in

the second half of

2021.

Bond investors have

become more aware

of the official credit

rating.

The interest for

green bonds and ESG

bonds seems to

increase.

Credit risk

Responsible: CFO

1. Risk of rental income loss

ON-GOING

Lease are generally long-

term, awarded for several

years at a time. The risk

exists that the tenant

All tenants must provide

a deposit or guarantee

for three-six months’

rent, and routines are in

place for approving the

financial institutions

No significant leases

were terminated

because of

bankruptcy in 2021.

Annual report 2021 - Norwegian Property ASA

Risk and risk management Page 106

Risk/opportunity and the

responsible executive

Description and timing

Strategy/measures

Changes to

developments in

2021

could go bankrupt during

the tenancy period, and

that both income and

investments in the

premises could be lost.

which are to provide

guarantees.

Tenants are credit-

assessed at lease award,

and total tenancy costs

as a share of total

turnover are analysed.

Extending a lease

beyond its term would

not be relevant for some

tenants, and some

leases could be

terminated early if rent

is not paid.

Generally speaking,

the number of

bankruptcies is

growing in the retail

and restaurant

sector owing to

effects of the

pandemic.

Liquidity risk

Responsible: CFO

1. Risk associated with

refinancing debt and

access to external capital

ON-GOING RISK

Property is a capital-

intensive sector, and

refinancing loans is a

continuous risk.

The group seeks to

reduce its refinancing

risk by:

- diversity of financing

sources

- lowest possible

instalments

- LTV at 45-55 per cent

- spread maturity

profile

- Long loans

- RCF to cover part of

bonds maturing over

the next 12 months.

Liquidity in the

capital market was

good, particularly in

Q3-2021, and

margins were back

to pre-COVID-19

levels during the

second half of the

year.

2. Risk of delayed rent

payments

ON-GOING RISK

Rents are paid quarterly in

advance. Interest on loans

usually falls due right after

rent payments. Were a big

share of rents to be

delayed, the ability to

service interest payments

and possible instalments

on debt could be at risk.

Reminders are issued

continuously.

The group will have

spare liquidity in the

form of NOK 300 million

in cash plus undrawn

credit and/or overdraft

facilities at any given

time

Delayed payments,

particularly in the

retail and restaurant

sectors, have been

one effect of

lockdowns imposed

to combat COVID-19.

The reduction in

revenue-based

rental income has

been about NOK 10

million.

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Risk and risk management Page 107

Risk/opportunity and the

responsible executive

Description and timing

Strategy/measures

Changes to

developments in

2021

Market risk

Responsible: marketing vice

president

1. Changes in market rents

ON-GOING RISK

When awarding new or

extending existing leases,

market conditions at the

negotiation date present a

risk.

Opportunity: market rents

expected to increase at

Fornebu with the

completion of the new

metro line around 2027.

The strategy is to own

high-quality properties

centrally located close

to public transport hubs.

Attractive areas will

maintain high market

rents for longer than

properties in more

peripheral areas.

Acquisition of

Snarøyveien 30.

Working on a strategy

for developing the

Fornebu area.

The letting market

was good in 2021,

and the group

achieved good rents

when leases expired.

It is finding that

demand for

premises is

particularly good in

Oslo’s CBD.

Construction of the

new metro to

Fornebu started in

2020 and plans call

for it to be finished

in 2027.

Vacancy in the portfolio

ON-GOING RISK

The property sector is

exposed to competition.

The risk of being unable to

let the buildings is higher

in an economic downturn.

New tenants often involve

higher costs than

extending existing leases.

The strategy is to own

high-quality properties

with central locations.

Attractive properties are

easier to let and also

have lower vacancy.

A good operations

organisation gives

tenants good service

and helps to enhance

their loyalty.

A competent marketing

team with experienced

personnel works on

letting.

The group has converted

several single-user

buildings to multi-user,

thereby reducing the

risk of large single-user

buildings remaining

vacant.

The letting market

was very good in

2021. Norwegian

Property

experienced a

flattish market in all

its core areas.

Good demand for

the group’s Business

Village concept.

The portfolio now

has fewer single-user

buildings which risk

being left vacant in

the near future. The

risk of increased

vacancy is

considered to have

declined during

2021.

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Risk and risk management Page 108

Risk/opportunity and the

responsible executive

Description and timing

Strategy/measures

Changes to

developments in

2021

Expanded the Business

Village concept to cover

many categories of

tenants, increasing

flexibility in terms of

duration and size.

Norwegian Property is

seeking to achieve a

spread of lease expiries

and a differentiated

body of tenants.

Turnover-based rents

ON-GOING RISK

A number of the shops and

restaurants at Aker Brygge

have turnover-based

rents. This means that

rental income fluctuates

with sales by the tenants.

The challenges affecting

retail could result in lower

rents for shop premises.

The Aker Brygge quarter

actively develops and

markets the area to

attract customers.

Continuous efforts are

made to find the right

mix of tenants at Aker

Brygge who will attract

the greatest number of

visitors and increase

turnover. A relatively

high proportion of

restaurants makes Aker

Brygge less vulnerable

to competition from

online shopping, for

example.

Moreover, Norwegian

Property has leases

where minimum rents

are at good levels.

Owing to COVID-19

and lockdowns, the

group has not

received any

material turnover-

based rents in 2021.

It expects these to

resume as soon as

the pandemic is over

and activity resumes.

2. Inflation

ON-GOING RISK

Most leases have full CPI

adjustment.

This is regarded as an

opportunity to increase

income as the CPI rises.

All new leases awarded

in 2021 have full CPI

adjustment.

Inflation in 2021 was

5.3 per cent, which is

high compared to

the level aimed at by

Norges Bank.

However, most

leases in the

portfolio were

adjusted according

Annual report 2021 - Norwegian Property ASA

Risk and risk management Page 109

Risk/opportunity and the

responsible executive

Description and timing

Strategy/measures

Changes to

developments in

2021

to the 3.5 per cent

October CPI.

Project risk

Responsible: project and

marketing vice presidents

1. Uncertainty over future

occupancy rate

WITHIN THREE-FIVE YEARS

When launching a

construction project, it is

unclear what the letting

market will look like at

completion.

The group does not

launch major projects

without having secured

a certain number of

leases for the completed

building.

No new projects

were initiated in

2021.

The letting market

developed positively

during 2021.

2. Cost overruns

WITHIN THREE-FIVE YEARS

Big projects will often have

an element of uncertainty

related to costs for both

procurement and design.

Through the pandemic the

cost of raw materials has

risen, and in turn

increased the construction

cost.

The group makes the

maximum possible use

of turnkey contracts for

its projects.

No big projects were

under way in 2021.

Construction cost

increased in 2021.

Still no sign of lower

cost in 2022.

3. Delays

WITHIN THREE-FIVE YEARS

Late delivery carries a cost

in reduced income and

possible compensation.

As a result of the

pandemic, late delivery

and uncertainty related to

time of delivery has

increased. This has

increased uncertainty for

completion of projects.

Progress and capacity in

planning processes is an

increasing challenge in the

City of Oslo.

Project management is

important, and is

followed up by a

competent team.

Turnkey contracts

reduce risk for the

group.

No big projects were

under way in 2021.

Problems with late

delivery has

increased in 2021

due to the

pandemic.

Annual report 2021 - Norwegian Property ASA

Risk and risk management Page 110

Risk/opportunity and the

responsible executive

Description and timing

Strategy/measures

Changes to

developments in

2021

4. Accidents

ON-GOING RISK

The threat of project-

related accidents is

present, and in the worst

case could cause injury to

people. Material damage

could also impose costs on

the group.

Serious efforts are

devoted to HSE in every

project run by

Norwegian Property.

No big projects were

under way in 2021.

5. Demolition and recycling

ON-GOING RISK, RISING

The latest trend is tougher

requirements for recycling

building materials.

Norwegian Property

expects it to become

harder to get permission

to demolish existing

buildings.

Demolition will also get

more expensive down the

road because greater care

and accuracy will be

needed so that materials

can be recycled.

Norwegian Property is

making soundings for

major renovations in

order to see how these

can be implemented

cost-effectively in future

projects.

In collaboration with

new and existing

tenants, the group will

find solutions for re-

using materials, and rent

out premises with just

the necessary

adjustments. Where

tenant adaptations and

minor projects are

concerned, profitability

calculations are made in

each individual case.

This trend attracted

continued attention

during 2021, and is

likely to increase.

A separate market

for the sale of

recycled materials is

being established.

Public requirements

and regulations will

most probably be

adapted to this

market in the future.

Social and governance risk

Responsible: CEO and CFO

1. Risk of human rights

violations and decent

working conditions

ONGOING RISK

As a property group with

all its activities in Norway,

Norwegian Property does

not face the greatest

human rights challenges in

its everyday operations.

However, the suppliers it

uses could be subject to

challenges, in part related

to social dumping. In the

construction industry, the

latter could be associated

NPRO is seeking to be a

responsible purchaser of

goods and services.

Through its ethical

guidelines and by acting

as a responsible

purchaser, the group

seeks to ensure that

suppliers apply key

principles which accord

with those of Norwegian

Property.

The Transparency

Act was passed in

2021, and it will take

effect from July

2022.

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Risk and risk management Page 111

Risk/opportunity and the

responsible executive

Description and timing

Strategy/measures

Changes to

developments in

2021

with economic migrants

whose wages and

employment conditions

are significantly worse

than for national workers.

Work is being done to

make expectations and

requirements towards

suppliers even more

explicit.

2. Equality and non-

discrimination among

employees.

ONGOING RISK:

In the construction

industry and in the real

estate industry, there is a

clear predominance of

male employees.

It is usually women who

work involuntarily part-

time in Norway, and there

are also generally lower

average wages for women

than for men.

Norwegian Property’s

ethical guidelines clearly

states that

discrimination is not

accepted.

All employees have to

go through the ethical

guidelines annually.

Most employees are

working full-time in

Norwegian Property, but

for those who wish part-

time work this has been

accepted.

The salary level for all

employees will be

reviewed, and

opportunities for skills

development and new

work tasks that can raise

salaries will be

considered for those

with low wages.

The Transparency

Act was passed in

2021, and it will take

effect from July

2022.

3. Non-discrimination of

people with disabilities

in properties and out-

door areas.

ONGOING RISK:

The focus is increasing on

the rights of people with

disabilities. There is a risk

that the reputation of the

company will be damaged

if it does not meet the

requirements for Universal

design of the buildings.

When doing

refurbishments of

buildings the company

complies with the

Norwegian law and

requirements regarding

Universal design. One

example in 2021 was

Sandakerveien 140.

Media has had

several stories about

discrimination of

people with

disabilities.

4. Risk of corruption

Corruption can be

devastating to the

company's finances and

operations.

NPRO aims to be a

responsible buyer and

investor. Ethical

guidelines that are made

known to all employees

Annual report 2021 - Norwegian Property ASA

Risk and risk management Page 112

Risk/opportunity and the

responsible executive

Description and timing

Strategy/measures

Changes to

developments in

2021

contain rules to combat

corruption.

Climate risk

Responsible: project and

operations vice presidents,

CFO

A. Physical risk

1. Increased precipitation

ON-GOING RISK, RISING

TOWARDS 2030

Rising precipitation will

give growing flooding

problems and greater risk

of leaks. Facades get more

vulnerable, since driving

rain affects more than just

roofs.

This will also increase

water levels in rivers,

which can flood cellars and

ground floors in nearby

buildings.

Norwegian Property

chooses materials and

solutions for

maintenance which will

be sustainable and

durable.

Attention paid to

climate risk

increased in 2021.

A greater threat of

flooding from an

anticipated increase

in precipitation has

led to stricter

government

standards for

construction

projects, and

discussions on

insurance cost and

coverage.

2. Higher sea level

WITHIN 20-30 YEARS

Properties at Aker Brygge

will be vulnerable in the

long term if sea level rises

significantly as a result of

climate change.

According to the

Norwegian Mapping

Authority, the sea level

will rise 46 cm around

Aker Brygge. That will

not be critical for the

properties there.

These expectations

did not change in

2021.

B. Transition risk

1. Demand for

environment-friendly

premises

Tenants are seeking

energy-efficiency,

environment-friendly

solutions and certified

buildings. Some also want

information on material

choices. Tenants differ in

their requirements. Big

and international

Norwegian Property

works to establish

energy-efficient

solutions in its buildings

and to convert to as

much clean energy as

possible. The seawater

pump at Aker Brygge,

for example, is

important in reducing

The risk did not

change markedly in

2021. Big tenants

demand this in their

specifications.

The risk is expected

to increase.

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Risk and risk management Page 113

Risk/opportunity and the

responsible executive

Description and timing

Strategy/measures

Changes to

developments in

2021

customers are particularly

concerned about this.

Norwegian Property’s

property portfolio includes

several old buildings which

are listed as worthy of

preservation. There are

limits on how many

energy-efficiency

measures can be

implemented, and which

ones. These buildings may

therefore become less

attractive in the future.

This could also be looked

upon as an opportunity

because tenants will be

positive to sign green

leases which will enable

Norwegian Property to

make investments in

properties which would

otherwise not be

affordable.

CO

2

e emissions there.

Buildings are to be

certified to Breeam or

Breeam-in-use within

2025.

During 2021, the group

completed its Breeam-

in-use certification as

Very Good of Kaibygning

1 and Fondbygget at

Aker Brygge.

Green leases mean that,

if an investment in

energy efficiency

measures lowers the

energy cost for tenants,

the capex will be

covered by increased

rent equal to the

reduced energy cost.

Green actions, such as

urban farming at Aker

Brygge and a green wall

of flowers, are measures

which have become

profitable because of

the positive interest

from tenants and

visitors.

2. Environmental

requirements from

investors

PRESENT, EXPECTED TO

RISE TOWARDS 2030

Investors in both bonds

and shares want more

information on climate

risk. Green bonds could

provide a broader investor

base and perhaps lower

financing costs than

normal bonds.

Norwegian Property

reports to the CDP,

produces an annual

climate report available

on its website and is

open about its

environmental strategy.

During 2021 the group

established a framework

for green bonds and

issued its first green

bond.

The attention paid

by the financial

community to

environmental

requirements, as

well as to

sustainability in

general, continued

to increase, much

because of the EU

taxonomy.

3. Environmental

requirements from

banks

PRESENT, EXPECTED TO

RISE TOWARDS 2030

Norwegian Property

reports to the CDP,

produces an annual

The banks have

shown growing

interest in the

Annual report 2021 - Norwegian Property ASA

Risk and risk management Page 114

Risk/opportunity and the

responsible executive

Description and timing

Strategy/measures

Changes to

developments in

2021

Requirements for

reporting and climate

adaptations are growing.

Climate risk will probably

be linked more strongly to

loan terms and access to

financing. Growing offers

of green bank loans.

climate report available

on its website and is

open about its

environmental strategy.

During 2021 the group

established a framework

for green bonds.

environment during

2020, and the group

sees that this is

beginning to provide

opportunities to

reduce financing

costs for green

purposes.

4. Insurance

FUTURE

Growing damage to

property from increased

precipitation and more

extreme weather could

lead to higher insurance

premiums.

Norwegian Property

works continuously to

maintain its buildings,

and selects good-quality

materials for this.

No developments

occurred in this area

during 2021.

5. Technological risk

PRESENT

Failing to update solutions

for energy efficiency or

adapt to tomorrow’s

solutions today could

leave Norwegian Property

with an outdated building

inventory where

regulatory changes, bank

lending terms and

customer demand could

have a negative impact on

the group.

New technological

solutions, such as the

internet of things (IoT)

represent an opportunity

for enhanced energy

efficiency and cost cuts.

Norwegian Property’s

strategy is that all new

buildings will be

certified to Breeam

Excellent as a minimum.

Older buildings will be

renovated when tenants

change, with modern

and cost-effective

technical solutions being

chosen.

An IoT project was

introduced in 2020 and

continued in 2021. This

will look at how the use

of sensor technology in

existing buildings can

boost operational and

energy efficiency. The

aim is to be at the

forefront in terms of

technological risk for the

existing building stock.

Technology is

constantly

developing, including

for the property

sector. The trend

with a growing

number of new

property technology

companies

continued in 2021.

New solutions are

also coming for more

climate-friendly

building materials

and products, such

as concrete.

6. Reputational risk

ON-GOING RISK, RISING

TOWARDS 2030

Being perceived as a

reputable and by all means

Norwegian Property has

established a

sustainability strategy

which aims to meet the

Given the increased

attention paid to the

climate by society at

large during 2021,

reputational risk

Annual report 2021 - Norwegian Property ASA

Risk and risk management Page 115

Risk/opportunity and the

responsible executive

Description and timing

Strategy/measures

Changes to

developments in

2021

assertive player on the

environment and the

climate will be important

in the future. That applies

both in relation to

investors and with an eye

to recruitment.

This image will influence

how attractive tenants

find it to choose Aker

Brygge.

requirements and

expectations of society.

Tenants are being more

involved in sustainability

thinking such as reuse of

building materials,

waste sorting and

energy efficiency efforts.

increased over the

year.

An increased

number of tenants

show interest in how

they may contribute

to reduce carbon

emissions. Many

tenants also ask for

input to their own

climate reporting.

7. Increased CO

2

taxes

FUTURE RISK

This relates both to energy

prices and waste handling.

Considered high risk in

probability, but low risk

since the cost affects the

group indirectly.

Waste and energy prices

are passed to the

tenant, but the group is

working to reduce

discharges/ emissions

because this could affect

how attractive the

buildings become.

The Norwegian

government has

recently presented a

plan for increased

taxes on carbon

emissions.

C. Regulatory risk

1. Government

requirements and

permits

ON-GOING RISK, RISING

TOWARDS 2030

As society adapts to

climate change, official

demands for energy

consumption, building

standards, traffic,

infrastructure, and the

development of drains/

sewers are likely to call for

higher taxes, including on

property.

Norwegian Property

adapts to the laws and

regulations in force at

any given time, and

applicable building

standards are observed

in the projects. Where

new projects are

concerned, the goal is to

achieve Breeam

Excellent certification.

Most leases contain

clauses that the tenant

pays the property tax.

No major property

tax changes during

2020.

The government

decided to increase

taxes on carbon

emissions in 2020,

and this will

probably affect

energy costs in the

future. No further

changes in 2021.

2. Car-free city

ON-GOING RISK

Aker Brygge lies right on

the edge of the car-free

zone in Oslo, and the

multi-storey car park can

still be accessed. However,

there is no guarantee that

Access to the multi-

storey car park is an

advantage for those

who work at Aker

Brygge and for those

visiting in their free

time.

The focus on car-free

zones in Oslo is

increasing. The city

council is working on

a proposal to

establish zones

Annual report 2021 - Norwegian Property ASA

Risk and risk management Page 116

Risk/opportunity and the

responsible executive

Description and timing

Strategy/measures

Changes to

developments in

2021

the zone will not be

expanded.

However, the outdoor

areas at Aker Brygge

have been

pedestrianised for many

years, which helps to

make it an attractive

place to visit for shop

and restaurant

customers. Norwegian

Property has worked to

ensure that a growing

number of visitors will

come from the

immediate vicinity,

which helps to reduce

the vulnerability of

reaching Aker Brygge by

car.

where fossil-fuel cars

are banned.

Annual report 2021 - Norwegian Property ASA

Risk and risk management Page 117

Risk and the responsible

executive

Description and timing

Strategy/measures

Changes to

developments in 2020

Effects of the coronavirus in

2021

Rents, vacancy, fair value

changes, risk of reduced

rental income and

inflationary pressures.

A general reduction in

economic activity as a

result of quarantines,

fewer people visiting

public spaces, reduced

travel and companies with

less to do will also affect

the letting market for

commercial properties.

That could cut rents,

increase vacancy, lower

property values and

enhance the risk of lost

rental income. Inflation is

expected to fall.

Norwegian Property has

introduced infection

control measures for

tenants, visitors and

employees in its

properties, in order to

contribute to a safe

environment for all.

Attractive, high-quality

properties in central

locations.

Good operations

organisation.

Competent marketing

team.

Spread of lease expiry

dates.

Differentiated tenant

portfolio.

Active development and

marketing of Aker Brygge.

Leases with good

minimum-rent levels.

There has been no

material run rate based

on turnover in 2021 and

2020, as both shops and

restaurants have been

locked down for parts of

the year.

Office tenants have not

been affected to the

same extent.

Interest-rate risk and access

to capital

An economic downturn

could reduce the level of

rents.

Access to capital will

worsen.

Negative value of interest-

rate derivatives will rise.

Policy of fixed interest

rates on more than 50 per

cent contributes to

predictability for interest-

rate costs.

A sensible LTV ratio (45-55

per cent) helps to reduce

the risk of very high costs

associated with possible

interest-rate increases.

As we hopefully

approach the end of the

pandemic, inflation is on

the rise in most

countries, which again

leads to higher interest

rates. This will increase

financing costs for the

part of the debt

portfolio with floating

interest rates. Lower

margins counteract this.

Access to capital was

good in 2021 in both

bank and bond markets.

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Risk and risk management Page 118

Risk and the responsible

executive

Description and timing

Strategy/measures

Changes to

developments in 2020

Effects of the war in Ukraine

Rents, vacancy, fair value

changes, risk of reduced

rental income and

inflationary pressures.

Increased energy cost

seems to be the

immediate effect of the

war in Ukraine.

As food production in

Ukraine is important for

the global supply, the war

may lead to higher food

prices.

It is probable that inflation

will raise considerably.

If the war leads to reduced

economic activity, it could

end up with more vacancy,

reduced rental income and

negative fair value

changes.

Attractive, high-quality

properties in central

locations.

Good operations

organisation.

Competent marketing

team.

Spread of lease expiry

dates.

Differentiated tenant

portfolio.

Leases with good

minimum-rent levels.

Most leases have full CPI

adjustment.

The risk for economic

consequences for the

Norwegian market is

present and increasing.

Interest-rate risk and access

to capital

An economic downturn

could reduce the level of

rents.

Access to capital will

probably be more

restricted, and credit

margins may increase.

Due to sanctions towards

Russians, compliance

routines and policies in

banks will most likely

become stricter, and this

could slow processes

regarding financing.

Policy of fixed interest

rates on more than 50 per

cent contributes to

predictability for interest-

rate costs.

A sensible LTV ratio (45-55

per cent) helps to reduce

the risk of very high costs

associated with possible

interest-rate increases.

.

Annual report 2021 - Norwegian Property ASA

Presentation of the directors Page 119

Presentation of the directors

The board of Norwegian Property ASA comprised

the following directors as at 31 December 2021.

Merete Haugli (chair)

Merete Haugli (born 1964), director since 13 April

2016 and chair since 19 April 2018, studied at

Bankakademiet and the BI Norwegian Business

School, and has pursued studies of transpersonal

psychology. She runs her own consultancy in such

areas as management training, mental training

and mentoring, and she has a versatile

background in finance such as SEB, Norway (Head

of Private Banking), Formuesforvaltning AS

(Managing director and board member for the

Oslo office), and ABG Sundal Collier ASA

(consultant for the compliance department and

the board) as well as Assistant Chief of Police,

Economic and environmental crime in Oslo Police

District. Since 2009 she has held various positions

as a board member. Haugli is also director of the

company Axactor SE as well as a member of the

nomination committee for Mowi ASA and North

Energy ASA.

Bjørn Henningsen (deputy chair)

Mr Bjørn Henningsen (born 1962), director since

10 October 2014, has an MSc in economics from

Heriot-Watt University and is a partner in Union

Eiendomskapital AS, which he helped establish in

2005. Henningsen has very long and broad

experience in real estate investment and

development, banking and finance. He was

previously finance director and managing director

of Investra ASA, and he also has extensive

experience from banks and financial institutions.

Henningsen is chair and director of numerous

companies in the Union group, including chair of

Union Gruppen AS and Union Eiendomskapital AS.

Anders Buchardt (director)

Anders Buchardt (born 1974) is a graduate (nw:

Siviløkonom) from the Norwegian School of

Economics (NHH) in Bergen and is the owner and

working chairman of AB Invest AS and Agate

Utvikling AS. Buchardt has a background from

PwC Consulting and Finansbanken/Storebrand

Bank, before establishing and growing his

property development business. In addition to

several residential projects, he has developed a

number of new, large hotel facilities in Norway

and Sweden over the past 15 years. Anders has

been responsible for the development of a

number of holiday home projects at mountain

destinations such as Hafjell, Kvitfjell,

Gaustatoppen and Hemsedal. Together with his

father Arthur, he owns and manages a larger

portfolio of hotel and office properties through AB

Invest AS. In addition to being chairman of the

board of his own companies, he is currently

chairman of the board of Pangea Property

Partners and board member of the trade

association Norsk Eiendom.

Cecilie Astrup Fredriksen (director)

Cecilie Astrup Fredriksen (born 1983), director

since 10 October 2014, obtained a BA in business

and Spanish from London Metropolitan University

in 2006. She is currently employed in Seatankers

Management Co Ltd and serves as a director of

several companies, including Mowi ASA. She is

affiliated with Geveran Trading Co Ltd, which

owned all the shares in Norwegian Property ASA

as at 31 December 2021.

Kathrine Astrup Fredriksen (director)

Kathrine Astrup Fredriksen (born 1983), director

since 13 April 2016, studied at the European

Business School in London. She is currently

employed by Seatankers Management Co Ltd in

London and serves as director in SFL Corporation

Ltd, Axactor SE and Avance Gas AS. Fredriksen’s

previous directorships include Seadrill Ltd,

Frontline Ltd and Golar LNG. She is affiliated with

Geveran Trading Co Ltd, which owned all the

shares in Norwegian Property ASA as at 31

December 2021.

Annual report 2021 - Norwegian Property ASA

Presentation of the directors Page 120

Carl Erik Krefting (director)

Carl Erik Krefting (born 1953), director since 19

April 2018, has a law degree from the University

of Oslo. He was a founder, CEO and major

shareholder of Søylen Eiendom AS. This company

opened Eger as Norway’s first high-end

department store in May 2009, acquired Norway’s

most well-known and oldest department store

Steen & Strøm and developed the Promenaden

Luxury District in Oslo with Luxury brands like

Gucci. Hermes, Louis Vuitton, Botega Veneta i.e .

Krefting has recently developed the Oslo Bay Area

with more than 100 Retail and F&B premises in a

joint ownership with Madison Int. Krefting was a

lawyer and partner in the Thommessen Krefting

Greve Lund law company from 1982 to 2004, and

in that connection held directorships in such

companies as Avantor ASA, Dyno Industrier ASA

and Gresvig ASA.

Lars Erich Nilsen (director)

Lars Erich Nilsen (born 1981), director since 26

April 2017, has been employed by Seatankers

Management Norway AS since 2014. He is the

general manager and chair of Seatankers

Management Norway AS as well as a director of

Axactor Capital AS, Axactor SE, Bulk Infrastructure

Holding AS, FP Bolig Holding AS and FP Bolig AS.

He has previously worked as an analyst at

Fearnley Advisors AS (2013-2014) and Fearnley

Fonds ASA/Fearnley Securities AS (2005-2013,

partner from 2007). Nilsen has a master’s degree

in business economics from the BI Norwegian

Business School. He is affiliated with Geveran

Trading Co Ltd, which owned all the shares in

Norwegian Property ASA as at 31 December 2021.

Annual report 2021 - Norwegian Property ASA

Definitions Page 121

Definitions

An explanation of the figures and terms mentioned in the annual report which are not derived directly from

the accounts is provided below.

Definition of financial APMs

Operating profit before administrative expenses

Revenues net of property expenses.

Profit before income tax and value adjustments

Profit before tax, adjusted for fair value adjustments to investment properties and financial

derivatives.

Market value of property portfolio

The market value of all the group’s properties regardless of accounting classification.

Market value of joint ventures

The book value of the investment in joint ventures, adjusted for the EPRA-revaluation of such

investments.

Gross interest-bearing debt

Book value totals for long-term and short-term interest-bearing debt, less the holdings of own

bonds.

Net interest-bearing debt

Gross interest-bearing debt, less interest bearing receivables and cash/cash equivalents.

LTV

Debt to asset ratio (loan to value).

Gross debt to asset ratio (gross LTV)

Interest-bearing debt divided by the fair market value of the property portfolio at the balance-

sheet date.

Net debt to asset ratio (net LTV)

Net interest-bearing debt divided by the fair market value of the property portfolio at the

balance-sheet date.

Equity ratio

Total equity divided by total equity and liabilities.

Pre-tax return on equity

Annualised pre-tax profit in the period divided by average total equity for the period in the

balance sheet.

Earnings per share (EPS)

Net earnings for the period divided by the average number of common shares during the period.

Diluted earnings per share takes into account the dilution effect of share options.

NAV, book value

Net asset value, the book value of total equity in the balance sheet.

Definition of other financial and operational measures and terms

Run rate for annual rent

Contracted annualised rental income for the property portfolio at the balance sheet date.

Weighted remaining duration of leases

Remaining contractual rent of current leases at the balance sheet date divided by the total

contractual rent for the entire lease term.

Space vacancy/Office vacancy

Space vacancy is the total number of square metres available for rent divided by the total

number of square metres in the market. Similarly, office vacancy is the number of office square

metres available for rent divided by the total number of office square metres in the market.

Annual report 2021 - Norwegian Property ASA

Definitions Page 122

Financial vacancy rate

Annualised market rent for space which generated no rental income at the balance sheet date,

divided by total annualised rent for total space (contract rent for leased space and market rent

for vacant space).

Gross yield

Gross yield on the balance sheet date for a property or portfolio of properties is calculated as

contractual annualised rental income divided by market value.

Net yield

When calculating net yield, maintenance and property-related costs are deducted from

contractual annualised rental income, which is then divided by the market value.

Prime yield

Yield for a fully leased property of best structural quality, with tenants in the best category and in

the best location.

Unutilised credit facilities

The difference between the total available credit facilities, based on the current loan

agreements, and the amounts at the balance sheet date which are deducted and accounted for

as interest-bearing debt in the balance sheet.

Interest hedging ratio

The share of interest-bearing liabilities hedged at the balance sheet date.

Base interest rate

A weighted average of the fixed and floating average interest rates at the balance-sheet date.

The fixed average interest rate is calculated as the weighted average of the fixed interest rate

paid by the company in relation to outstanding interest-rate contracts and loans. The floating

average interest rate is calculated as the weighted average of the Nibor rate paid on interest-

bearing debt. The interest-rate base does not include accrued finance charges or margin.

Average interest rate

Weighted average interest rate on interest-bearing debt and fixed-rate interest agreements at

the balance-sheet date.

Average interest margin

The weighted average of the interest margin on the outstanding interest-bearing debt at the

balance-sheet date.

Remaining time to maturity for interest-bearing

debt

Weighted remaining period until maturity for interest-bearing debt at the balance-sheet date.

Remaining time to maturity for interest hedge

agreements

The weighted remaining period until maturity for interest hedge agreements at the balance-

sheet date.

Like for like

Change in rental income from one period to another based on the same income-generating

property portfolio, with rental income adjusted for purchases and sales of properties.

Independent appraisers

Akershus Eiendom and Cushman & Wakefield.

Oslo CBD

The central business district is considered the most attractive area for office space in Oslo. It is

usually restricted to the districts of Aker Brygge, Tjuvholmen and Vika.

Scope 1

Use of fossil energy sources and CO

2

e related to the operation of Norwegian Property as a group.

Covers transport for employees in working hours using cars leased or owned by Norwegian

Property, but also the use of oil-fired heating in the buildings.

Scope 2

Covers energy consumption and associated emissions in the buildings – in other words, distance

heating, cooling and electricity.

Scope 3

Indirect emissions related to leasing or purchasing goods or services. Waste and tenant use of

propane, as well as business travel by Norwegian Property’s employees are categorised as scope

3.

CO

2

e

CO

2

equivalent. The group’s energy consumption and waste are converted to CO

2

e emissions on

the basis of a corporate accounting and reporting standard – an international standard

developed by the greenhouse gas (GHG) protocol initiative.

Annual report 2021 - Norwegian Property ASA

Sources and references to Scenario analysis Page 123

Sources and references to Scenario analysis

Afry. (2021). Future Cities. Retrieved from: https://afry.com/no-no/artikkel/hva-mener-de-unge-om-

fremtidens-byer

Regjeringen. (2021). A European Green Deal – Norwegian perspectives and contributes. Retrieved from:

https://www.regjeringen.no/contentassets/38453d5f5f5d42779aaa3059b200a25f/a-european-green-deal-

norwegian-perspectives-and-contributions-20.04.2021.pdf

Climate Scenarios. (2021). Climate Change Scenarios (SSP and RPC). Retrieved from:

https://climatescenarios.org/primer/mitigation/ Klima Oslo. (2020). Climate Change Vulnerability Analysis

for Oslo. Retrieved from:

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Vulnerability-Analysis-for-Oslo-short-version.pdf

Deloitte. (2020). Climate Scenarios and Consumer Business. (2020). Retrieved from:

https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/consumer-business/deloitte-uk-climate-

scenarios-and-consumer-business.pdf

Grønn Byggallianse og Norsk Eiendom. (2016). Eiendomssektorens veikart mot 2050. Retrieved from:

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Direktoratet for forvaltning og økonomistyring. (2021). Handlingsplan for økt andel klima- og miljøvennlige

offentlige anskaffelser og grønn innovasjon. Retrieved from:

https://anskaffelser.no/sites/default/files/2021-

09/dfo_handlingsplan_2021_01.pdf

Intergovernmental Panel on Climate Change. (2021). 6th Assessment Report – Summary for Policymakers.

Retrieved from: https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_SPM_final.pdf

Intergovernmental Panel on Climate Change. (2014). 5th Assessment Report.

International Energy Agency. (2021). Net Zero by 2050 – A Roadmap for the Global Energy Sector.

International Energy Agency. (2020). World Energy Outlook 2020.

Finance Norway. (2021). Klimarapport Finans Norge. Retrieved from:

https://www.finansnorge.no/siteassets/skadeforsikring/klimarapporten/finans-norges-klimarapport-

2021_enkeltsider.pdf

Norsk Klimaservicesenter. (2021). Klimaprofil Oslo og Akershus. Retrieved from:

https://klimaservicesenter.no/kss/klimaprofiler/oslo-og-akershus

Klimaetaten, Oslo kommune. (2019). Ekstremnedbør Oslo: skadeomfang og kostnader. Retrieved from:

https://www.klimaoslo.no/wp-content/uploads/sites/88/2019/09/Rapport-Skadeomfang-og-Kostnader-

Ekstremregn-Oslo.pdf

Klimaetaten, Oslo kommune. (2019). Klimaendringer og klimautfordringer i Oslo mot år 2100. Retrieved

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https://www.klimaoslo.no/wp-content/uploads/sites/88/2020/02/Klimatilpasning-Klimaendringer-og-

klimautfordringer-i-Oslo-frem-mot-2100.pdf

Annual report 2021 - Norwegian Property ASA

Sources and references to Scenario analysis Page 124

Klimaetaten, Oslo kommune. (2020). Klimasårbarhetsanalyse for Oslo. Retrieved from:

https://www.klimaoslo.no/wp-content/uploads/sites/88/2020/03/Klimasarbarhetsanalyse-for-Oslo.pdf

NVE. (2021). Langsiktig kraftmarkedsanalyse 2021-2040. Retrieved from:

https://publikasjoner.nve.no/rapport/2021/rapport2021_29.pdf

Opinion for Klimaetaten ved Oslo kommune. (2021). Klimaundersøkelsen 2021: Befolkningsdelen Oslo.

Retrieved from:

https://www.klimaoslo.no/wp-

content/uploads/sites/88/2021/06/Klimaundersokelsen_2021_Hovedgrafikk_Befolkningen_Oslo.pdf

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Statistics Norway. (2020). Electricity prices.

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Annual report 2021 - Norwegian Property ASA

Contact Page 125

Contact

Norwegian Property ASA

Støperigata 2

NO-0250

Oslo

PO Box 1657, Vika

NO-0120 Oslo

Norway

www.npro.no

Reception

Tel.: +47 22 83 40 20

Support centre

Tel.: +47 48 05 03 00

E-mail: kundesenter@npro.no

Investor relations

Haavard Rønning

CFO

Tel.: +47 40 02 00 19

E-mail: hr@npro.no

Sales and marketing

Ellen Cathrine Kobro

EVP Sales and Marketing

Tel.: +47 95 29 24 78

E-mail: ek@npro.no