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Good morning, and welcome to Entra's second quarter presentation brought you from Oslo. Let me start with some highlights in the quarter. Rental income of NOK 602 million in the quarter versus NOK 587 million same quarter last year. Net income from property management NOK 370 million, and our external appraisers have increased the value of our property portfolio with 1.3% in the quarter, and net value changes of NOK 756 million. Profit before tax thus of NOK 1.126 billion in the quarter. It's been a busy quarter from us. We have rented out 36,600 square meters, leaving us with a net letting of 13 million. We've also acquired 2 properties and increased our stake in Oslo S Utvikling in the quarter, very different transactions also with a slightly different strategic rationale. One acquisition was increasing and strengthening and growing our presence at the Helsfyr portfolio, acquiring a high-quality asset there. One acquisition was a value-add investment in one of our existing clusters in Bergen, and increasing our stake at Oslo S Utvikling securing and strengthening also our role as an urban developer in the [indiscernible] area and the area around the central station. In addition, we also, in July, announced that we have acquired a small hotel in the Tullin cluster in Oslo, seeing that this also is an important part of our plan for urban development in this area of the city. We have also finalized 1 of our projects in the quarter, and we have decided to pay out semiannual dividend of NOK 2.50 to be paid out on October 12. Moving on to operations. As we mentioned last quarter, activity in the letting market slowed down through the first quarter following the lockdown. We did have experience that activity picked up again in May. And May, June, July have been very busy months for us, continuing also in July, and we do expect to see that the letting activity in the market will be very high in the second half of this year. In July, we also announced this week that we have signed 2 large contracts, 1 in Bergen, 7,400 square meters with the Bergen Municipality in our project in Møllendalsveien 6-8. And just today, also, we announced that we have renegotiated the contract of 13,200 square meters with the Norwegian Planning and Building Authorities in Oslo, meaning that we will also now start refurbishment of that building in [indiscernible] shortly. In the second quarter, we signed a total of 36,600 square meters or NOK 93 million of rental income. Out of that, NOK 6 million was in our ongoing projects, terminated contracts in the quarter of NOK 38 million and leaving us then with a net letting of NOK 13 million. As you can see from the table here, the largest contract in the quarter was a renegotiation with the Western Police District in Bergen of 14,100 square meters. We also renegotiated with Station 1 in Drammensveien at Skøyen for 2,300 square meters. And pleased to see that SAP Norway has chosen to move into our ongoing project in Universitetsgata 7, signing 1,700 square meters there. In Trondheim, the Directorate of Immigration has signed 1,400 square meters renegotiation there. And in our project, St. Olavsplass 5, has signed 1,100 square meters. The occupancy is currently at 97.4% in our portfolio and average lease duration, including projects of 6.9 years. We finalized this project in Grønland 32 in Drammen. This is a refurbishment of 5,000 square meter for a public tenant in this building of 7,400 square meters. The project was completed on time and cost, with a yield on cost there of 7%. We currently have 10 projects ongoing in our project portfolio. And let me start by saying that all our projects are progressing according to plan, on time, quality and cost. And as you can see from the list, we have 4 green arrows on the occupancy in the quarter. At Universitetsgata 7-9, occupancy has increased from to 84% to 97% -- 86%, sorry, to 97% in the quarter, and we're close to fully let 1 quarter ahead of completion. In the Universitetsgata 2, this is where we are creating a rebel, a hub for technology with flexible lease contracts. We were pleased to see that occupancy increased from 54% to 73% in the quarter. This is fully in line with what we have communicated since we started the project that this building will pick up in occupancy closer to completion seeing that we are targeting smaller tenants and also offering flexible lease contracts. In St. Olavs plass, occupancy has increased from 60% to 68%. And in Bergen, occupancy increased from 44% to 95% following the contract with the Bergen municipality. Here, you can also see that this project has, from the start, been planned in 2 phases, where the first contract we signed will be completed refurbishment in the fourth quarter this year. The second contract signed with the Bergen municipality will be then completed 1 year later in the fourth quarter of '22. So complete occupancy on the entire portfolio currently at 67%. The remaining project in Oslo are either close to fully let or they have a long time until completion. So we are on track on letting there. In Bergen, we have also a very strong interest for our project in Nygårdsgaten 91-93. We do expect to see occupancy pick up here in the next couple of quarters. In Trondheim, as we communicated, when starting the project, we do expect to see occupancy to pick up closer to completion. Now as you probably also are aware of, building materials costs have increased quite a lot through the past 9 months, specifically on steel and wood. And please take note that we have fixed price contracts on materials in our ongoing project pipeline. A few words on the acquisitions we have done. Firstly, to grow and strengthen our presence at our Helsfyr cluster, we have acquired this asset, Fyrstikkalléen 1 at Helsfyr in Oslo. Helsfyr is a large and well-established office cluster in Oslo, located on a central communication hub just 7 minutes metro ride from the central station of Oslo. It's one of the main hubs for public tenants in Oslo due to its excellent access to public transportation. And the surrounding area of Helsfyr is currently undergoing development with a strong also pipeline of residential development ongoing. And we do expect to see that the urban qualities will further enhance the attractiveness of this cluster in the future. Prior to this acquisition, Entra had 3 assets under management here, around 80,000 square meters there in addition to a project where we can develop 20,000 square meters. Now following this acquisition, we will have a presence of 110,000 square meter in this cluster, bringing us up to a market share close to 30%, which means that we will be a strong player in this cluster going forward. Fyrstikkalléen 1 is a building of around 40,000 square meters, consisting of 3 building bodies joined together with a common atrium, where you also have the shared services. It's a large, high-quality, modern, flexible office building. It's fully let to 3 public tenants, with an average lease duration of 9.4 years, 12 months rolling rent currently at NOK 95 million and the total transaction volume of NOK 2.4 billion. This transaction closed in June this year. In Bergen, we acquired value-add property in 1 of our existing clusters. As you can see from this picture, you have the central bus station in Bergen here with a large white rooftop. The blue buildings are Entra's buildings in this area. And at the bottom here, you can see Nygårdsgaten, which is our ongoing project in Bergen. Here, we are currently targeting record high levels of rents in Bergen. And the last building to target these rents was this building, Media City in Bergen. And we also have a plot here, Lars Hilles gate 25, undergoing [indiscernible]. So this is an area where Entra is working on the transformation, and we do expect to see that rental levels will pick up in the years to come also in the neighboring buildings. So we definitely expect to see that we should be able to pick up on rent when renegotiating contracts in this building. The building is of 5,900 square meters, fully let, 5.4 years WAULT, and total transaction value here of NOK 298 million, closing also in June this year. We announced last week that we have also acquired a hotel Savoy in the Tullin quarter. This is an area in the city center of Oslo, where Entra has been working with the transformation for the past 5 years. And you can see all the buildings here are marked with pale blue has already been developed or currently is under development by Entra. And when transforming this area from a rather sleepy part of the city into an attractive destination, we also need to add an offering, keeping activity up outside normal office hours, meaning that ground floors, retail, restaurants, residential and also hotels is an important part of that urban development. So we believe this transaction is a good example on how we can strengthen Entra's urban development in a cluster by adding the hotel. And we clearly also see synergies in respect of bundling and cross-marketing the hotel to visitors to our university office building and also the conferences which will be held at the level in this cluster. The building is of 5,500 square meters currently has 93 hotel rooms. It's operated by Nordic Choice on a 4-year lease contract. And we will consider redeveloping this into a small boutique hotel, potentially also ahead of the lease contract expiring in close contact and with choice. But we also clearly see that the building suits well as an office building, if that should be a preferred development. The transaction value is of NOK 185 million, and this transaction closed today. We announced in June that we have increased our stake in Oslo S Utvikling from 1/3 to 50% ownership. This is a company, which Entra has held a stake of 1/3 in since 2004 together with 2 equal partners, Linstow, family-owned company; and also Bane NOR Eiendom, a government-owned real estate developer. Also has developed the barcode area here between the central station of Oslo and the seafront into becoming the CBD East of Oslo. A total of 12 high-rise buildings here have already been developed and sold. That's around 150,000 square meters. And Oslo has also developed this area here with 1,100 residential units and ground floor with services, retail, restaurants of 12,500 square meters. Now the remaining development in Oslo is this area here within the state line, where we can develop 800 residential units, also then with services on the ground floor. And Oslo also has 72% ownership in this land plot A, which is currently undergoing zoning for commercial purposes, and also has an opportunity to acquire a 25% stake in this land plot here at favorable terms. This plot is currently undergoing zoning for somewhere between 45,000 to 55,000 square meters, mainly commercial purposes. Now if you take a look at this snapshot here, it shows the residential development, where you can develop the 800 resi units. The first project has already been started. This part here of 265 units is currently under construction and 76% of those units have already been sold. So this is the first resi part, which will be completed in the second quarter of 2023. And then the seafront here and this final building stage will be following that. The transaction value for Entra's share here was NOK 475 million, and this transaction also closed today on July 14. A few words on the market situation. The COVID-19 situation is currently under control in Norway. Society has gradually opened up, and we are in Stage 3 out of the government's 4 stages in the reopening plan. Around 69% of the adult population has currently received the first shot of vaccine and 37% of our population is fully vaccinated. We have seen that employment levels have been less affected by COVID-19 than what was expected. And we're now seeing a strong pickup in activity and also expectations of employment growth going forward. Rent development has been stable through the pandemic, and Entra has not seen any negative impact on the leases signed by us through the last year. Activity level in the first quarter was slowed down by lockdowns. We have, however, seen an increase in the amount of new searches for offices, which have come out through the second quarter and also continued into the second half of '21. And according to Entra's consensus report, rental growth is expected to be around 3% for the next couple of years. However, we clearly also see that some of the leading property houses in Oslo are much more bullish in respect to rental growth for the next couple of years, particularly for the city center of Oslo. Vacancies are expected to come down and decrease as a result of employment growth and also the fact that the new build pipeline is limited for the next couple of years. So we are thus optimistic about the letting market in the years to come. In the regional cities, also, we're seeing stable terms, both in respect of rent levels and vacancies. The transaction market has been very strong in the second -- sorry, first half of this year. A total of NOK 70 billion was sold in the first half, meaning that we're probably going to see record levels in the full year of 2021. Entra has been active in the transaction market in the first half, and we see very strong competition for all kinds of transaction. There is strong interest both for long, secure cash flows for value-add opportunities and also for development sites. The financing markets continue to be favorable and expectations for rental growth have balancing effects on rising interest rates in the long term. The strong interest and competition in the transaction market shows that investors clearly also have a positive view on the future. And prime yield has remained stable around NOK 325 million to NOK 330 million following the yield compression we experienced in the second half of 2020. So moving on to Anders and financial update.
Good morning. I think there are 5 key takeaways from the financial side for this quarter. Revenues coming in as expected. Costs are slightly higher than we expected, reasoning being the driver being that we had set provisions for a total of NOK 10 million on restructuring from an organizational project that we completed in Entra during the quarter and also the final part of the cost from the strategic interest in the company. Third is that the value changes came in very strong. The fourth, we have been able to utilize a very attractive financing market to secure about almost NOK 4 billion in new funding. And finally, five, is basically we're back on the growth trajectory in terms of our revenues. Looking at the actual figures, revenues coming in at NOK 602 million, so up NOK 11 million from NOK 591 million in the first quarter. The key driver is the M&As that we've done in the first quarter, contributing some NOK 8 million to the P&L. If we compare it to the -- If you compare to the second quarter last year at NOK 587 million were up NOK 15 million. And again, acquisitions contributed about NOK 11 million. Those have been done during the last year. We have a net negative contribution from projects of NOK 15 million as we have taken out assets from production and into projects that then will be come back into cash flow generating activity over the next couple of years. And that has been offset by also for this quarter, a very strong like-for-like growth at 2.9%. And this has to be compared with the CPI for 2020, which ended up at 0.7%. So the underlying like-for-like growth in excess of CPI is 2.2%. And please bear in mind that about 90% or 86% of our contracts are basically being CPI adjusted every year because it did not offer negotiations. So it's remaining 14% that will drive that strong like-for-like growth in total. So that's why we're saying the like-for-like growth of 2.9% or 2.2% post CPI is very strong. Net income for Property Management coming at NOK 370 million on par with the first quarter and also NOK 20 million up from the second quarter last year. I'll come back into the details on that one. And again, that gives a profit before tax at NOK 1,126 billion. So again, a strong quarter on the number side. Looking at the cash earnings annualized 4 quarters rolling up at 8.2%, 11% CAGR on -- since the IPO back in 2014. NRV ending up at NOK 198, NTA correspondingly at NOK 196. The NRV growth, again, CAGR is 15% since 2014. If we include that we have paid out NOK 27.15 dividends since then the CAGR is 17%. So again, a strong underlying growth in values. In terms of the P&L, operating costs coming at NOK 63 million, so basically on par with the second quarter second quarter last year, a bit up from the first quarter. Otherwise, net other income, other costs at NOK 4 million, basically as expected. We have an admin cost of NOK 47 million. Of those NOK 47 million, NOK 7 million is attributable to the restructuring and the strategic interest in the company. So basically, underlying admin costs now at around NOK 40 million. The associated companies at NOK 1 million, so significantly down from last year. The reason is that the main part of that is S Utvikling, the company that we agreed to acquire 17% of just now. They are primarily resi company, and they will book their gains when the apartments are being delivered over to the buyers. That means, for the next 18 to 24 months, results will be flat again. And then they will pick up when the next residential project has been delivered. Financing costs at NOK 128 million. Basically, we're leveraging sort of the very good financing market at the moment. Worthwhile saying that the payable tax is NOK 4 million in the quarter. The group, as such, is not in a tax payable position. So this is all contributable to the subsidiary that we own in Bergen 60% ownership, and we're not able to leverage our tax loss carryforward. Going in and looking at the next 6 quarters revenues. We see that the starting at NOK 602 million, NOK 26 million increase comes from the acquisitions that we made were closed in the second quarter. Most of them, especially the big 1 at [indiscernible] Helsfyr was closed at the very end of June, and that -- it will then give a slight growth in the third quarter. The full revenues on that asset is NOK 94 million on a full year basis. Then in the third quarter, we will finally get to our large projects, U 2 and U 7-9 into production. They will start off slow at the end of the quarter, but they will contribute some NOK 6 million in revenues for the third quarter isolated. And then we have a small negative net letting of NOK 3 million, actually yielding then full revenues of around NOK 630 million for the third quarter. And then we will see it will gradually pick up following the introduction on the of the projects being put into operations. So again, it's -- we're back -- Entra is back on the growth track. For the third quarter is driven primarily by the acquisitions that we've done. And from the fourth quarter onwards, you will see that the existing product pipeline, currently 10 projects yielding fully rented around -- a bit more than NOK 500 million in revenues, will start -- in annual revenues that is, will start feeding into our P&L. So again, a solid growth trajectory going forward. Moving on to the balance sheet, starting on the NOK 58 million. We invested some NOK 3.2 billion in the quarter in acquisitions. We put around NOK 561 million in our project development as discussed earlier, we are ramping up the product development part. And then we have a very solid also this quarter of NOK 724 million in value changes. If you look at the pie chart on the right-hand side of the of the exhibit, you will see that 37%, or about NOK 297 million, comes from yield effects. And those elects are primarily in -- on the fringe areas of Oslo, where, up at [indiscernible] also, we bought that large asset just in the quarter in Bergen and in Trondheim. Then we see a 33% of the NOK 724 million or basically NOK 265 million coming from project. And then the third contributor is the market rent of NOK 108 million or 14%. So again, a strong value uplift also in this quarter. If we're adding then the value of the portfolio that we own up at Bergen, which will be converted to resi and sold to a third party on a prearranged price of NOK 400 million plus, adding the value of also NOK 860 million it gives us now a balance sheet of NOK 64 billion. So quite significant at least on our scale. Finally, on the financial side, while the first quarter was a very quiet quarter, basically the -- we were in standstill period given the strategic interest in Entra, the second quarter really loosened up and we were able to utilize a very attractive financing market. So we issued 3 new Green Bonds and also tapped -- did 3 taps. So a total of NOK 3.8 billion was secured in the bond market at very attractive prices. And we also were able to extend the duration a bit longer than we usually. We usually find as a sweet spot is around 5 to 7 years in our bonds. We now took it a little bit longer and -- but still on very attractive terms. And we also rolled our CP portfolio of NOK 1.2 billion. This gives us total debt as of the second quarter of 55%, so up from 49.5% last quarter. Everything we do now in bonds is green bonds. There are green bonds, supported by our BREEM certified asset portfolio. Looking at the LTV, now it is coming up to 40.2%, interest coverage 3.5, so -- which basically gives us still a very solid ship and with a good sort of capacity for further growth if we so desire. Average rent at the end of the quarter and ended up at 2.12% and really driven by the extremely low NIBOR. I mean, if 3 months NIBOR now is about 23, 24 basis points. And we will expect on sort of on a normalized level, as you can see on the dotted line, to end up around 230, 240 somewhere. If we did a new bond today, a new fiber bond typically, we will do that at a margin of about 73, 74 bps. 3-month NIBOR, if you want to do a floater, is current 23, 34 basis points, but the swap rate -- fiber swap is around 135. So -- which basically gives a marginal cost of a fully set fiber bond would be in the range of 210. So a very attractive financing market. And we do find that the bond market is very liquid, very open, very receptive to the Entra bonds, and also at very good prices. CP market, it's a small market for us, but was NOK 1.2 billion, but it's an important part because the prices are so good. Really, we get about a 20 bps margin on the CPs. And if you add a backstopping on the bank facility, it's still in the range of 35 to 45 bps. And then the bank market we've maintained our indiscernible] with out 5 partner banks, and we find them supportive of Entra's needs, both now and into the future. So all in all, on the -- both on the P&L side and on the balance sheet, we're happy with the situation. Thank you.
Okay. So a few closing remarks from me. First, overall, we see clearly very solid market fundamentals. Rental market is picking up, and we are expecting high activity in the letting market also going forward. Expectations also for reduced vacancies and rental growth in the years to come. The transaction market continues to be very strong and prime yields remain around 3.25% to 3.30%. In Entra, we expect a fairly strong growth ahead. As Anders said, our current project portfolio will add more than NOK 500 million of rental income when fully let. We've also closed 6 transactions in the first half, adding some NOK 150 million of rental income and also some long-term value-add potential. And going forward, we will continue to actively use our balance sheet and access to funding to add further growth. And we have also had a review of Entra's strategy and how to best position Entra in the future. The headlines are that we will continue to optimize and grow our portfolio of high-quality offices. We will also continue to build and progress our development pipeline, and we will increase our focus on urban development dimension and our ability to create attractive places to both work and live. And we will also actively use our competitive advantages in respect of competencies, scale, network and ESG leadership. So that's all from us today, and we'll open up for some questions to now.
What is the rationale for buying a new fully let building on long-term leases, sub-4% gross yield? Is there a value creation plan?
As I mentioned, we acquired the asset at Helsfyr to both strengthen and grow our presence in that cluster. It's a cluster where we are seeing that there is a development ongoing enhancing the urban qualities of the area. And we have a very positive outlook on Helsfyr as a destination. And it's a high-quality building, which fits well into our portfolio, and obviously, operational synergies for us in that cluster.
Have the -- now 2 large shareholders, Balder and Castellum, changed the strategy at all? Have these parties had any influence on the decision to increase acquisition activity and decrease leverage?
Well, others said, we have been working on our -- reshaping a bit our strategy independent on those 2 shareholders. But we do have a very regular dialogue with all our shareholders taking in inputs. But what we've focused on in Entra through 2019 and most parts of '20 has been to get started our project pipeline. And seeing that we now have so many projects ongoing, we also found it to try to be more active in the transaction market, filling up our pipeline going forward. So we've definitely increased our focus, seeing that we now also are back on track with our project pipeline. You like to add something?
How much of the Q2 value uplift relates to the market effects where Entra has been a counterpart in the transaction?
We had value uplifts of NOK 724 million. The only place where we saw a notable write-up was at the [indiscernible] Helsfyr area, where Fyrstikkalléen 1 the large acquisition was taking place. That came -- in at [indiscernible] , the total value change on that area was NOK 294 million. And of those NOK 294 million, NOK 168 million comes from yield compression and remaining is pretty much increased market rent. So I think in terms of the actual yield reduction, it's about NOK 164 million out of the NOK 724 million. And I think it is worthwhile mentioning that the -- when we acquired that asset at Helsfyr, at NOK 2.3 billion, that was a competitive process. There were several bidders into that process. And I guess all of us were pretty much on -- pretty much the same levels. So I think, yes, it was not a cheap asset, but it was a fair price -- fairly priced asset. And when we compare that to other transactions in the same area, especially there was 1 big asset being sold out at [indiscernible], a bit further northwest of our cluster, that was done at a net deal of 3.9 and ours were done at 3.75. And I mean any day of the week, we would choose the asset that we bought. The 3.9 net-yield asset is worse quality, tenant is worse quality, and the area is not as nice as the 1 that we see in health per. So clearly, that as it was not -- when we bought was not a cheap asset to buy. It was fairly priced. And -- but it was a reasonable right asset.
The vacancy rate increased quarter-on-quarter by 70 bps in most in Stavanger. Can you please comment?
Yes. Firstly, running such a big portfolio as we have, or by big in our view at least, at a vacancy of less than 3% is really, really good. I mean you do have some frictional vacancy in the portfolio. Tenants are moving in, tenants are moving out, and having used it less than 3% is just very, very low. So that's great. In terms of Stavanger, that is driven primarily -- not primary, but singularly by 1 asset, the Kanalpiren that we acquired in some months back, which basically had a vacancy of 42%. So that is the key driver. And even with the 42% vacancy, it's -- we did that at a net yield of 4.8%. If we are able to rent the remaining part of that asset, it will yield revenues about NOK 31 billion and take up the net yield to about 7.5. So we knew all the way that when we bought that asset, it would have a negative impact on the overall occupancy on the portfolio, but it's going to be good -- that was going to be a good acquisition. It's slightly optimistic, but we feel it's going to end up somewhere between good and very good.
You just announced a large renewal in [ Walskato123 ]. How much CapEx is planned in the refurbishment? And how is the rental levels versus the old lease?
Rent levels are on par with the existing lease. It's an option that the tenant has to extend. We will put quite a bit of CapEx into that. I don't think the number is -- we haven't really -- it's not firmly set, so -- but up to about 14,000 per square meter, maybe 14,000, 15,000 square meter is quite a big CapEx, but the asset is now about 20 years old, it needs an upgrade for -- especially on the technical part and the ventilation systems. And it will be a profitable project for us. And -- but it wouldn't have the super profits that we've seen in the other profits that we are doing now lately. But it's a good project. It's -- I mean, we love to have a public tenant renegotiating for 10 years and doing that on a profitable way for us, including the CapEx. And in that particular area, there aren't many places in Oslo where -- in Central Oslo where basically have new build activity, in that area, there will be some 10,000 square meters coming into the market and which would otherwise have been competing with our asset. So we're very happy that the tenant decided to -- or that we were able to agree with the tenant to renegotiate that on good terms. We will come out next quarter with a full -- probably next quarter, I guess, in -- with a full project overview of that. But it's fair to say it's a profit project, but...
Could you please comment on the property costs? The letting and property admin seems to be NOK 10 million higher than the normal level.
Yes, yes. There are -- it is a bit high this quarter. I think NOK 3 million of that comes from the restructuring part because we also had some restructuring in the operational organization. We have some more costs on the IT side. We're implementing a new HR system, which allocated to that part. And we also -- in the previous quarters, we have -- especially on the Q1, we had a reversal of the provisions for the COVID-19 effects that we were sort of -- we -- I were probably a bit pessimistic in the second quarter and last year, and it basically didn't hit us at all. So there are several sort of smaller factors contributing. But I think in terms of the one-off factor there is the NOK 3 million in restructuring costs that were basically put on that quarter alone. But happy to go into some details with the person that question. It's a bit too much detail to put on the web like this.
Are we seeing a strategic shift in Entra, more development of areas, including hotels and residential?
Well, what we're clearly seeing is that if we are to be the best office provider in the future, developing destinations with high urban quality is important. And we see that it's natural for us to also take a space in respect of developing the ground source and the resis the hotels, which is part of urban development.
But we are an office company.
For sure.
And we will continue to be an office company. There's no doubt about that. We are an office company. This has to do with adding value to our office business in those clusters. And in that way, we will still have the option to -- for example, on the resi part, not like we did up at [indiscernible], have an agreement with a resi developer, prearranged price, which we find very attractive. So this basically gives us an alternative C in terms of -- and we like to have optionality on our side, and this sort of move yields or gives us optionality. But it's -- we're not going to be -- I mean we're not -- on that hotel part, we're not going to run the hotel. We're going to own the hotel. And we're also looking at Plan A is to continue having it as hotel. Plan B is to it [indiscernible] an office as well with reasonably good -- or good yield on costs. So it's -- this is more sort of optionality than anything else.
What are you seeing with your letting negotiations? Are tenants talking about any downsizing or expansion plans?
Very little downsizing discussions currently. It's more providing optionality again that if typically rent a large space, maybe you would want some 10%, 20% of that space to be more flexible in terms and duration, but we're experiencing that most of our companies do expect to use the same amount of space as they have been, but maybe rearrange how they use space more.
If I can add there. We had a discussion with the lead state agency in Norway about the trends that they are seeing for -- because they are negotiating for a number of state tenants. And they do cooperate with a lot of European peers. And what [indiscernible] our Norwegian company was saying, is that, in most European countries or many European countries, people are talking about downscaling. They haven't seen that trend in Norway. We have seen 2 tenant cases, not in our portfolio, but where they were basically come out of saying we would like to reduce our space and work from home on a more permanent basis for certain parts of the week. But what we see from both our private tenants and public tenants is that, yes, they will probably work from home somewhat. I mean pre COVID-19, it could be up to 1 day a week in Norway, maybe it's 2 days a week. What we do see is that the -- it's basically Fridays and then Mondays, which are the preferred day of working from home. And if everybody -- all the employees still have to be in the office on Tuesday, Wednesday, Thursday, it doesn't really change the space required from our tenants. It's more a matter of having more empty spaces on Mondays and Fridays, but it is still early to tell. But at least we haven't seen it in our negotiations. We have to see intense service done in Norway among tenants, and we have not seen it or heard it from our discussions with the state enterprise basically managing a number of state contracts.
Prior to COVID-19, we also clearly see that the public tenants were having discussions on whether they still should have 1 separate desk each, and that might change that if they want to have a home office flexibility, they might have to share their desk with other people, but it's still a discussion going on in the public sector.
Given your plans to progress the development pipeline, should we expect more development starts in the coming 12 months?
Well, we have a couple of projects in the marketing phase. So if we find the right tenants, we are ready to start more projects definitely.
And the final question, with the number of development starts and the hotel acquisition, will the new strategy of Entra remain higher up the risk curve going forward?
Well, I think as Anders clearly stated here, we are still an office company, and we will be continuing working with that as a core. It's more a question of using our capabilities, our competitive advantages also to taking a larger part of the development in the urban dimension, in the clusters where we already are. So from a risk perspective, if you look at the ongoing projects, we see that we have started some more projects at a lower occupancy rate, but also seeing that we are delivering on the letting side and having some projects ongoing with lower pre-let ratios in different cities. We're very comfortable with seeing also our strong balance sheet and the fact that we have very strong market fundamentals in the cities we are in.