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Good morning all, and welcome to Entra's Third Quarter Presentation brought to you here from Oslo. So let's move right on to the highlights of the quarter. Rental income came in at NOK 788 million versus NOK 639 million same quarter last year, and net income from property management of NOK 406 million. Net value changes, negative of NOK 3,823 million in the quarter mainly explained by the external appraisers having increased their return requirements on our property portfolio even though yet not evidenced in the transaction market, leaving us thus with a loss before tax of negative or -- NOK 3,430 million.
Key events. Happy again to state that we have a positive net letting -- solid letting in the quarter, NOK 6 million. We also finalized 1 redevelopment project in the quarter in St. Olavs plass. And we started 1 new refurbishment project in Trondheim Brattørkaia 13. Very happy to say that we have secured additional bank funding of NOK 5 billion in the quarter. And our Board has decided to pay out a dividend of NOK 2.6 per share for the first half of this year to be paid out on November 2.
Moving on to operation and markets, starting with the letting situation. As I already mentioned, a solid quarter of letting. We signed and renewed leases of NOK 80 million in the quarter. That's around 27,000 square meters. At the same time, contracts for around NOK 23 million were terminated in the quarter, leaving us with a net letting of NOK 6 million.
If we take a look at the largest contracts in the table here, very large contracts signed at Langkaia 1 with a public tenant, a total of 9,300 square meters combination there of renegotiation and also increase in volume. And we also renegotiated a contract with the Norwegian tax authorities at Fredrik Selmers vei in Helsfyr for 2,000 square meters, we've renegotiated with Tidal in Lakkegata. And here at Biskop Gunnerus’ gate 14, the retailer [indiscernible] on the ground floor has renegotiated and Posten has also increased their space with 1,000 square meters.
If you take a look at our occupancy, it's slightly down in the quarter, currently at 96.6%. And our average lease duration is currently now at 6.1 years or 6.3 years, including the project portfolio.
As I said, we finalized the project in St. Olavs plass in the quarter. This is the last large redevelopment in the Tullinkvartalet, which we have been working with for quite some years. It's a project of 16,500 square meters with a total project cost of NOK 1.14 billion. We started this project with a very low pre-let ratio of 21%. So very happy to see that we can report it at 95% now close to fully let upon completion. The project will be certified very good, and yield on cost here is 4.9%. And we started reporting this project of 4.8%.
This project has also recently just been awarded the Transformation Project of the Year for the efforts we have done here on the ground floor, opening up the space and inviting the city into the building, creating more urban qualities in this neighborhood.
So a few words also on the Tullinkvartalet because with the completion of St. Olavs plass 5, Entra has also finalized the development of this Tullinkvartalet, which has been something we have worked on for quite some years. It's actually Entra's largest urban development project so far. The Tullin area is located just 3 minutes walk from the National Theater metro station in the city center of Oslo. And our ambition has been to develop this area into an attractive office cluster competing with CBD in Oslo. And our target has also been that we will see both rents and yields trend towards CBD levels over time.
So we have put quite a lot of effort into finding also the right operators on the ground floor, adding qualities and social spaces, which help us to also attract the tenants willing to pay top rent. So very, very happy to see that we have now also achieved a rent uplift here with as much as 50% in top rents in the Tullinkvartalet over the years, we've been working with this urban development project.
And through this reformation of a part of the city and has also put itself on the map as a recognized urban developer, we have received several awards for our environmental innovation project in Kristian Augusts gate 13. It was actually the first project in Norway targeting a circular economy where as much as 80% of the materials going into that building have been reused for our project in Universitetsgata 2. Here at the back, Rubel, we achieved the award as the Urban Developer of the Year for 2022, which is more or less like the Oscar for redevelopers in Norway. And just now, we also were awarded the City Life Project of the Year for having put life into a part of the city, which was pretty sleepy before we started the transformation.
Now the efforts we've put in on the learning from this project will be very valuable for us also when we continue working with the transformation of other areas in Oslo, like the Central Station, which is going to go through a huge transformation over the next 5 to 10 years.
So in Trondheim, we started a smaller refurbishment project also in the quarter. At the bottom right here, you can see our rack of buildings on the seafront in Trondheim, Brattørkaia. And this is actually the last part of the urban development project at Brattørkaia in Trondheim. It's a beautiful old building, which will go through a refurbishment, 6,000 square meters of office space, and currently 72% pre-let. And the total project cost here is NOK 227 million. Out of that, around NOK 132.5 million is CapEx. Targeting here BREEAM In-Use excellent certification and also yield on cost of 5%.
So if you move on to our ongoing list of projects, very happy to be able to present a beautiful picture with a lot of green arrows this quarter. First, let me start by saying that all the projects are progressing according to reported cost on time. Our occupancy on a portfolio level is currently at 76%. And if I'll go through the changes here, you can see that the green arrow on Tordenskiolds gate 12, Stenersgata1, and Vahls gate 1-3, we're marking an uptick in yield on cost on 10 basis points on these 3 projects. That's explained by CPI coming in higher than expected, giving us some rounding up effects on the yield on cost.
In Møllendalsveien 6-8, yield loan cost is up with 20 basis points. This is a project where we reported cost increases a year ago due to cost increases in the projects following the COVID situation. So very happy to see that we're now back on track with the yield on costs where we started reporting at 5.2%. At Kongens gate 87, we have increased occupancy, signing a new lease contract with Access. And in Nygårdsgaten, we just yesterday announced that Sopra Steria, already a tenant in the building, has increased their space, almost doubling their space. So occupancy is up to 77%.
We've also increased the costs with around 9%, seeing that we have increased some qualities on the back of the new contracts which have been signed. This is, however, more than compensated by increase in rent, leaving us with a yield on cost at 5.8%, up from 5.5% last quarter.
On the general note, I'd like to also comment that we are currently experiencing delay between the cost increases we're seeing in the projects and also capital costs. And on the other hand, the willingness to pay high rents with our customers or expectations, I'd say, for rents with our customers. So this will potentially also delay the start of projects in our project pipeline. Having said that, in the current market situation, Entra will also have even strong focus on capital discipline and how we allocate available capital in order to maximize shareholder value.
So, a few words on the market situation. The high inflation, increasing interest rates and also more subdued outlook for international growth will or is expected also to have implications for the Norwegian economy, cooling it down. Having said that, the Norwegian economy clearly stands out with its very strong government finances, and also the fact that we are benefiting from higher energy prices.
GDP growth is expected to come out at 3.2% for 2022 and 1.5% for 2023 according to Statistics Norway. The September CPI came in at 6.9%, and almost all of Entra's lease contracts are 100% linked to CPI, most of them based on the index of November.
Now following the pandemic, the employment growth has been very strong in Norway and particularly in the Greater Oslo region. According to Statistics Norway, the number of employees grew with as much as 8% the last year in the Greater Oslo region. And unemployment rates in Norway are expected to be as low as 3.3% at the end of this year, then trending to turn upwards. However, only a slight increase in unemployment is expected in the coming years.
In the property market, we are not seeing any signs of cooling down in respect of letting activity. Ideal Statistics, who tracks all signed leases in the larger cities in Norway just came out with updated numbers this week for the third quarter, stating that both the number of contracts and also volumes signed in the third quarter this year was actually at the highest level we've seen for a third quarter.
And in respect of take-up, we are not experiencing that our customers are demanding less space. We also saw that [indiscernible], the affiliate of GLL in Norway in August came out with their survey tracking space requirements. They ask every year the large companies on the move, whether they expect to need less space, maintain their space or increase. And as much as 82% stated that they expect to maintain or increase their space requirements going forward.
If we take a look at the graphs here, you can see that our consensus report states that the vacancy currently is around 5.5% in the Oslo market, and it's expected to stay at that level going forward. And from the bottom graph here, you can also see that there is very limited new supply coming into the market in the years to come. So the low vacancy and the very limited supply of new offices in the years to come, provides a very good property market fundamentals for us in the years to come, particularly in Central Oslo.
A few words also on the transaction market. The first half of this year, we experienced more or less normal activity. And then we've clearly seen that the activity has cooled off during the summer and into the autumn. So year-to-date transaction volumes have been around NOK 60 billion. We're expecting to see around NOK 100 billion this year, but there is, of course, more uncertainty to those numbers now seeing that activity currently is pretty moderate.
In respect of yields, according to our consensus report, yields for prime office in Oslo are expected to expand to around 4% over the next year. Having said that, the low supply of new office space and upward pressures on rents is expected to have some balancing effects on property valuations.
A few words also on our ESG work and reporting, we were, once again, very happy to see that we were acknowledged with the 5-star rating with GRESB's framework with a total score of 90 points. GRESB is a very comprehensive ESG reporting framework that measures ESG performance both on an individual asset level and on a portfolio level, and also, by far, the most reputed framework within the real estate sector. In 2021, as much as 1,500 companies and assets for around USD 5.7 trillion was included in their assessment of companies. We're also very happy to see that we have maintained our gold level with EPRA for compliance with their best practices. In respect to reporting, both in sustainability and financial reporting.
This is important to us as ESG is a very integrated part of our business model, and it clearly proves also that we are dedicated to being an environmental leader. And it also enables us to capitalize on our environmental qualities and our governance structure, both in equity and debt markets.
So I think that leaves it for you, Anders, to take it from here.
Thank you, Sonja. I guess we could fairly say that the intensity of the second -- first half of the year has been fully spread out into the third quarter as well. We have seen market volatility, we've seen equity pressures, we've seen inflation and Central Bank stepping in. And also the -- some companies struggling with their funding and getting new liquidity.
In that turmoil, Norway actually stands out in a very positive way, actually benefiting from the high energy prices with a strong GDP and employment growth and also with a strong state being willing -- evidenced being willing to support the business environment. So on a country basis, Norway actually stands out.
Entra also has done well for the third quarter. Operations are pretty much dead on as expected, so we won't spend too much time on that. So we talk about the value changes. We had as Sonja said, almost NOK 4 billion in negative value changes on the assets in the quarter and also on the funding situation, which is rather positive.
Moving on to the revenues, ending up with NOK 788 million, so we're up NOK 5 million from the second quarter and basically then on where we expected to be. We're up NOK 149 million since the third quarter last year. The bulk of it, NOK 115 million, comes from acquisitions and then Oslo Areal being the key driver, of course. We also divested assets for NOK 28 million, leaving a net positive contributions from acquisitions and divestments of NOK 87 million.
Then we have, throughout the year, put in a number of -- put a number of assets into operations coming back from projects, giving another NOK 42 million in quarterly revenues. We've also taken out 2 assets from the management portfolio, taking out sort of NOK 4 million. So a net addition of -- from the operation portfolio of NOK 38 million.
Finally, we have a CPI of 5.1% that came into from November to November last year. And as you will recall, almost all of Entra's contracts are 100% linked to CPI. No arguments, no discussions, basically linked to CPI. Year-on-year, on September, it's 6.9% in Norway. Second, we have almost like -- a pretty flat like-for-like growth, both on the quarter and on the year-to-date.
On the net income or property management coming out to NOK 406 million, you can see it's primarily driven by the increased interest cost. So it's SEK 133 million above third quarter last year. That is basically explanation for coming down. So we're now seeing that the increased cost of debt is starting to bite on the P&L.
Finally, profit before tax, or in this case, loss before tax coming at NOK 3,430 million, impacting greatly by the almost NOK 4 billion of write-downs on the asset portfolio, partly offset by NOK 130 million in write-ups of the -- on the hedges. I'll come back into that later.
Cash earnings steady at 9.2 per share. That is 12 months rolling annualized. And NRV down from 230 last quarter to 210 now, again, driven by the negative value changes. Still a 13% in CAGR on the NRV from our IPO back in 2014. NTA at 208.
Looking at the actual P&L, a few comments on the numbers. Firstly, you see that operating cost coming at NOK 66 million. That is 8.4% of revenues. So it's actually not in line with what we are expecting to see from our business, we should be in sort of the low 8s. What we have for this quarter is that we have a NOK 6 million additional charge of energy costs. And in Norway, all energy costs are being paid by the tenants. So our energy cost is on the vacant areas only. But even that, given the increase in energy costs, it's up by NOK 6 million compared to the third quarter last year. And clearly, energy cost is a big part of the cost now for our tenants. We charge it basically directly to them. It's basically a nonstarter discussion. It's in the contract they have to pay.
Looking at the admin cost coming at 45, so basically in line what we had expected. On the year-to-date at 154. Please bear in mind that we had a NOK 17 million sort of one-off restructuring charge relating to the Oslo Areal back in the first quarter of -- was the total of NOK 17 million.
Then we have on the associated companies. A quick comment is a negative NOK 17 million. Of that, almost all of it is -- has to do with the one real estate company that we own a small part of that actually wrote down the values of the assets as well. So it's a sort of asset-driven value changes result.
Finally, on the financing cost coming in at 275. So again, 133 higher than the third quarter last year. And that is a result of having NOK 15 billion more in debt and 105 basis points increased cost of debt compared to last year. But all in all, on the operational part, very happy with the results. And I'll come back to the value changes afterwards.
When we look at the sort of what this -- what is known in the market in terms of projects coming in line with signed contracts, net letting, acquisitions, divestments, this is basically how Entra's revenues will look like in the next 6 quarters. And as you can see, we're expecting about NOK 800 million for the fourth quarter, primarily driven by 4 new projects coming online during the quarter 2 in Oslo, 1 in Bergen and 1 in Trondheim. Then in addition to sort of increased revenues from those projects coming online, because tenants will gradually move into those assets, so typically, over like almost a 3-quarter period. We had put in here a 5.5% expected CPI, and I think we said we're on the sort of safe side on that one. Then we expect to see a fairly flat revenue development over to 2023.
You would expect that the revenues would come up as the projects were putting back -- all the project we put back now on the project portfolio are between into operations. What we will have is in the summer next year, there's 1 large assets that will be the tenant will move out, and that will have a negative NOK 18 million quarterly impact for next summer. And that will then be sort of offset and a bit more by the new projects coming online.
And then again, we see the -- we expect to put in place -- put in here now with 3.5% CPI for the -- going into 2024.
But if you look at sort of the overall picture, you will recall, we had revenues of NOK 2.5 billion in 2021. 2022, we expect to be on the 3,150, give or take. So it's a 26%, up from '21. And in 2023 if we just add off these numbers, you get to 3,450, and so another 10% increase.
But if we compare from 2021, 2023 -- back in 2021, 2,508 and now 3,450 in 2023. It's actually a 38% increase. Of that, clearly, Oslo Areal is a big part. But if you take out the effect of Oslo Areal, is still a 19% increase in revenues from 2021 to 2023 of which about half of it is CPI. And the rest is basically our organic growth, developing the project portfolio, putting assets into place, getting more revenues out of each square meter. So again, Entra is now and has been for the last 2 years on a sort of a total growth track, which we're happy to see.
On the balance sheet part, we invested another NOK 570 million in projects this quarter. So basically online what we've done in the last couple of quarters. Of that, about NOK 35 million is on smaller sort of tenant alterations, smaller projects. The rest is basically on the big project portfolio. What stands out, of course, is the negative or the write-down on the assets of NOK 3,953 million or almost NOK 4 billion. And let's say, just take 1 step back on that one. Entra has a policy of using 2 external appraisers and they do a DCF analysis on each asset every quarter.
What we saw now in the third quarter was that basically, there were very few transactions taking place uncertainty is sort of rather large in the market. And we thus decided to take in a third appraiser for this quarter. So for this quarter, the appraisals were done by 3 independent companies, each of them appraising each asset sort of on a DCF basis.
What we did see even though there has been, as in most other countries now, very limited or no transaction evidence, we saw that our appraisers basically taking into a number of soft factors, saying something has happened in the market which meant that they have taken up rate of return requirements between 20 and 66 basis points. It varies a bit between different kind of assets.
And we have taken the average of those 3 appraisers into our books, leading to a net negative of almost NOK 4 billion. So we do see that other companies have different views on this, other countries that we finish on this, but we find this to be a very prudent way of doing it. Basically take an external view and having their average of their appraisals into our books directly, no adjustments from our side. But clearly, it's an impact.
So that means the yield on our portfolio went up by 25 bps in the quarter, up to 4.17 in the management portfolio. And if we include what also the 1 billion that we wrote down in the second quarter, that means we've taken up the average -- or the net yield on portfolio by 29 basis points.
This clearly has an impact on also the debt ratios. And when we look at -- I mean, this quarter has been a continuation of the first half year. We see that the base rates have come up further. The credit margins have remained fairly stable and for us, at least compared to the high levels not for us because we're actually on the low-grade margin compared to most other companies, but we are up from what we used to from the last 10 years. And we see that funding availability especially in the bond market has been a much dried up. I mean the euro market is pretty dry. Entra is only in the NOK market. So it doesn't really affect us that way, but clearly, it affects the full market.
In that context, we are very happy to see that we have secured another NOK 5 billion in new bank funding during the quarter. Entra uses 5 partner banks. And 3 of them together put up NOK 5 billion in the quarter, and we're very happy to see this because it actually it is evidence of the trust and the comfort that the banks put in Entra as a debitor.
In addition, we rolled NOK 650 million in commercial papers the average credit margin on the average, but the credit margin on those store between 71 and 90 basis points. So still actually reasonably funding compared to today's market, but clearly higher than what we have been used to see. What we see is the ICR at 2.3% and the EPRA LTV at 51%. If we use the Moody's definition of LTV, basically on a total asset basis, we're at 49.4%. So our policy in terms of LTV is that Entra over time shall not be above 50%. So even though the Moody's is below, Entra is slightly above, that means the asset rotation is on the agenda for Entra now and also going forward.
Okay, in terms of the -- how we see the funding market right now. CP market is still available but the liquidity is significantly lower than we have seen. And that is typically a market that is on and off. Now we're sort of quasi off even though we were able to get another NOK 650 million in the quarter. The bond market is still open in Norway, but credit margins are on levels where at least for now, we are not in the business of printing paper on.
Currently, a 5-year bond for Entra would be at a credit margin of about 220 basis points. But we do have incoming calls from bond investors still willing to lend us money on that prices, but we're rather happy about our bank partners in this respect. And then on the bank market asset, it's -- banks have to prioritize now. There's a number of large bonds maturing in the real estate industry in Sweden and in Norway. And banks will need to pick their partners and pick their friends. And we're happy to see now evidence that the banks are good friends of Entra's. So a good thank you for -- so our 5 partner banks, DNB, Nordea, SEB, Handelsbanken and Swed. Long-lasting relationships really pays off in times like this.
Two more exhibits on the financing part. Average interest cost -- nominal interest cost as of the end of the quarter was 317. You have -- you can see here now that we have then extrapolated the forward interest curve as of September 30, put in our existing hedges and basically our as is credit margins to see how will the Entra's cost of debt develop during the next years. What we see now is that we're actually a good way up the curve already. So with the existing market, we will end up with the cost of debt -- nominal cost of debt at about 3 6, 3 7 in years to come and then flattening out. So clearly, not a positive picture. Look at -- interest cost will come up, but actually not bad because we are already way up there already, and you can see it sort of putting into our numbers.
On the hedge portfolio part, which is an important driver for why we are not following the full effect of the forward curve, clearly 49% of our debt portfolio is hedged. And that hedge portfolio is on an average term to maturity of 4.9 years. Then also credit margins basically locked up on an average for 2.6 years.
Last exhibit we'd like to show is the cash situation and the debt expiry or debt maturities. So as Sonja also said, we have NOK 8.3 billion now in available funding and cash so significantly increased since the second quarter. And when we look at the maturity profile on the debt, you see that in the next year, there will be NOK 3.7 billion of debt expiring or maturing. And then in the next 6 months, another NOK 2.3 billion. So if we take the full effect of the next 18 months it's a NOK 6 billion debt maturing. And then we had NOK 8 billion to offset that right now. And we have been generating some NOK 1.3 billion and NOK 1.5 billion in cash over the -- each year, the next couple of years. And then we have a project CapEx expected around NOK 1.5 billion. So all in all, things are not looking bad for Entra in terms of liquidity. And we're sort of -- we're very comfortable with the situation.
Also, I should say, you see that the green color denotes bonds. Bonds have to be repaid. There's no discussions about it. The light blue is bank debt. You can discuss with banks and they are good discussion partners for us. We are already in discussions now on the debt that is expiring the 2-point-something billion to have that extended into another 1 to 2 years. We also did that during the second quarter, so it's basically business as usual for us. So all in all, it's -- it's kind of hard to say it's a positive quarter when we have sort of written down NOK 4 billion on our assets, but we believe that is a prudent way to do it.
And operationally, we're doing good. And on the financing side, it's a big step forward in terms of securing the company for the years to come. Thank you.
Thank you, Anders. So a few closing remarks before we go to Q&A. As I mentioned, the high inflation, increasing interest rates and more subdued outlook for international growth is expected to also cool down economy in Norway. However, the Norwegian economy clearly stands out with its very strong government finances and also the fact that we are benefiting from higher energy prices. Low activity in the transaction market through the autumn. And we're also experiencing an upward pressure on yields, driven primarily then by the increased cost of debt and also higher return requirements.
We are experiencing a continued strong letting market. There are low vacancies and very limited new supply coming into the market, which also provides us a favorable property market fundamentals for a landlord like Entra and also some resilience in the event of declining demand.
Entra has a very solid balance sheet and financing. We have now secured additional NOK 5 billion of bank funding and have more than NOK 8 billion available to meet future obligations and debt maturities.
So I think that closes us for now for the presentation. And I do believe we might have some questions, Tone?
Let's do quite a few questions. To start with what the inflation adjustments of your rent, your tenants will also get higher electricity bills. Will they be able to take on both increased rent and high electricity bills?
Yes, that's not really a concern for us because if you look at our tenant base as we also put forward some evidence on in the last quarter, we have 57% of them public tenants and also very high-quality tenants all over, so not something we're concerned about.
May I just add a few sort of -- during the COVID part, I mean, we had revenue loss of about NOK 15 million. So which actually equals about 0.3% of total revenue base for those 8 quarters. So it really shows the underlying strength on our tenants. But clearly, it is an issue for business. I mean we said that Norway as a whole is benefiting from higher energy prices. But clearly, it's an issue for businesses when the cost of ownership will come up. And if we look at the -- back in 2019, energy cost was 19% of what we charge to the tenants. If you take the first half of 2022, it was 36% of what we charge our tenants on the common costs. So clearly, I mean, the energy cost is an issue for them, but for us, it's a nonstarter, and we do not -- that is -- it hasn't been a discussion, and it will not be a discussion.
On the backdrop of both higher inflation and higher electricity bills, do you see any risk on decreasing market trends?
Well, I think that we are in a pretty solid starting point in Norway, as I already mentioned through the market slides that we have very low vacancies in Oslo. We have a very limited new supply coming in. And we're basically at a good starting point for future declines in demand or also FFR if we should see any changes. So it's -- we're not -- that's not really a big concern for us.
And also if a -- if you look at the -- on our -- there's 1 table in the quarterly report about the management portfolio, and you see that it is currently significantly under rented. So even though if market rents should come down, I mean it still has -- it's a fairly solid cushion to the existing revenue base. So I think that makes us to add on, Sonja...
You now have an LTV above 50%, and the portfolio yield is still relatively low. How will you maintain your investment-grade rating?
There's 2 questions on that one. Let me just take the IG rating first from Moody's. Entra now has a Baa1 rating from Moody's, equal to BBB+ from S&P with a negative outlook. That means there's a one change in 3 that we will have a downgrade. When Moody looks -- Moody's looks at our -- and their view on Entra, they have certain key metrics to maintain the rating. LTV should be below 45%. We're now at 49.4%. So we're above that. They would have an ICR less than 2.5%, and we now were 2.3%, so we're actually below on that one as well. So those 2 are clearly negatives in terms of ratings.
Then again, there's a number of positive factors that Moody's will take into account. Clearly, the business fundamentals, Entra is a solid company. The assets are high quality. They're well placed limited residual risk. The business fundamentals are strong. The share of public tenants is important for Moody's, and it's now all in the high 50s, which, at least in what they signal to us, it is positive and it's sort of significant enough to maintain a good sort of green arrow on that one.
Thirdly, and probably most important is the available liquidity that we have. And in times like these, Moody's is very sort of concerned about, do the companies have available cash or undrawn facilities to put in place for replacing the debt maturities and as we talked about, that is -- Entra in that way is very strong. We are like if I'm at 2.4x the next year's expiries. So on that one, it's a mix. Clearly, they will review us as they have signal they will do, and there are positive negatives on that one.
So that is on the IG part. And still, it's a long way down from Baa1 to Baa2 to Baa3 and then further down. So we are very optimistic in terms of the IG rating but it might be clearly that, I mean the site will take a look at us from the Baa1 to Baa2. And then the second part was about the LTV.
Your stated target LTV is below 50% over time. How will you reduce your debt to achieve this level?
Like I said yes, over time, it's an important not above 50% over time. That means for shorter periods of time, we can have sort of according to our own policy LTV ratios above that. Let me say the share issues is not on the agenda for Entra. Share issue is not on the agenda for Entra. And we -- clearly, then there's basically 2 ways of doing that. We can continue to run the company to build and develop value, and you can divest assets. And both are important for Entra going forward. Both sort of maintained the sort of solid operations of the company and also to look at asset rotation. So -- those are the 2 sort of elements in our toolbox for that.
What was the interest rate cost on a new NOK 5 billion facility?
It wasn't 1 -- there were actually 3 different facilities from 3 different banks. We never go out with sort of exact where we're -- the pricing of sort of bank financing. What I can say is that there's -- one of the brokers in Norway called Union, they do a bank survey every quarter. And in that survey, the summary was that the average credit margin on bank debt for real estate in Norway now was 252 basis points. But there was a wide range from about 160 and upwards. And without going to this, I can say that Entra is in the very low-end part of that range without going into specific details.
The yield on cost on a number of your projects remains below 5%, yet your cost of capital is slightly higher than this currently. How do you reconcile the value creation opportunity here in the current context?
Sorry, I need to -- it's quasi long answer to this one as well, sorry about that. The yield on cost is calculated based on the CapEx that we use on that or invest in that project and the initial balance sheet value when we make the decision. So any value changes in sort of during the contract period, up or down is not reflecting the yield on cost. The only thing that will sort of change the yield on cost on that part basically denominator is fixed, balance sheet values at decision and CapEx. And then it's basically the top line revenue, the net revenues from that project. And that is being adjusted based from -- those revenues are being adjusted on a CPI basis from the time we signed the contract with a new tenant. So that there can be some changes on the on cost. Due to that we get a higher or lower CPI than expected.
In addition, when we make new and in this case, a lot better contracts than we initially than we expected, those are the drivers for the change yield on cost.
In terms of the yield on cost on projects, there are certain Oslo projects that have a yield on cost down to 4 4, 4 5 area. So still above our cost of debt, both as is and also going through -- coming through in the sort of next year. So clearly, there's a pressure on the profitability on our projects if -- in terms of when values decline. But as we see it now, all the projects that we are undergoing as we speak have a significant value -- or if you can value-add effect on our books. If you just add up the total expected value of those projects and compare that to initial book value and CapEx. There's even with a very conservative or some would say probably a pessimistic view on the future, there's about NOK 1.4 billion in value from those projects in itself. So a significant value being there. And there's another -- of that, about NOK 1 billion is already put into our books and the remaining 0.5 billion remains to be taken.
But clearly, I mean, the value -- I mean, when interest cost goes up, when the rate of return commerce goes up, it has an impact on total values. As we saw when we wrote down the full value of the managed portfolio by almost NOK 4 billion. Sorry for the long answer, but it's actually -- it has to be said.
On the value changes of the property portfolio, can you repeat why the yield is up by 25 basis points? And do you see any support from deals?
I am sorry. Why the...
Yield is up by 25 basis points, and if this is supported by yields.
Okay, I would say, no, it is not supported by actual transaction taking place. It is the appraisers estimates that something has changed in the market due to the higher cost of funding and thus also the rate of return requirements from the -- on the equity side. So there's no hard evidence in the market. We have not seen and also our 3 appraisers have seen in the market. So that is basically on an opinion that gravity works kind of argument saying something has changed and that also will impact the values.
And as I said, different companies use different methodologies. Our principle is to take the values that the appraisers provide to us and use that directly. But we do see that there are -- again, there are different views. And if you look at appraisers in other countries, they have more of a transaction-based attitude or modus operandi for doing their evaluations.
What CPI has been factored into the valuations for 2023?
On the -- that will be the average of those 3 because there's -- they're not using the same CPI. So on average, it's 5.3%. So that corresponds -- it's a bit more conservative than what we use in the income bit use 5.5 and also the statistics Norway -- sorry, the Central Bank of Norway.
The ICR is falling quite dramatically. Do you have any concerns? And how you will mitigate further pressure?
Are you asking me if I'm concerned? I mean I was born concerned, and I've owned this skill for 55 years. So clearly, I mean, the ICR is now at 2.3. With the continued sort of -- I mean we've taken a large part of the increased interest cost already, we expect that to continue into the next 2 quarters. With that, our ICR will be -- should be around sort of low 2s probably. It is not a concern in terms of any covenants on the bank or bond agreements. So I'm totally unconcerned or not concerned on that one. The covenant on our debt is 75% LTV and 1.4x ICR.
So I mean we're way on the safe side. But clearly, it will be a discussion point with Moody's, where they have a -- they want to see a 2.5 ICR with our -- as compared to the low 2s that we expect to have. So a concern, it's not a concern, but it will be a discussion for our business and a concern. But for our discussion with Moody's, it will be a discussion point.
How are you seeing credit margins trending? And what is your refinancing needs in the next 3 years?
Say again, Tone, please.
How are you seeing credit margins are trending? And what are your refinancing needs the next 3 years, 2 to 3 years?
I mean in terms of our refinancing needs, it might be that the question came before we had the presentation or during the presentation, but I think that clearly well covered in the -- when you look at the maturity profile and the available debt. So -- and I think the most important thing I'd like to emphasize again is, yes, we're well covered now for almost 2 years. And you see the debt expiries now are basically bank debt. That is basically -- it's our modus operandi to extend that debt -- and that's the way we work with our 5 partner banks. We worked with them for as long as anyone can remember and it's basically the way we do business. We extend and prolong our debt maturities.
Sorry, the first question -- there was another part. The credit margins.
Yes, the refinancing needs, the credit margins trending.
It's -- for us -- on the bank market, they clearly have come up. So reflecting the bank's funding cost as well. So I would say, typically up by some 50, 60 bps in terms of -- on the bank market in general. But again, Entra is sort of on the favorable side on the -- on that curve. I guess that a lot of other companies will have higher margin increase, credit margin increase also from the bank side.
In terms of bonds for the quarter, it's been fairly stable between 200 and 220 bps on great margin on the 5 year bond. But I mean, that's clearly up from the things we've seen in the past, where typically we did that on a 70, 80 basis points. I mean, we did one at 53 basis points back in 2015 that we still treasure. But it's been fairly stable now for the last quarter. CP market is so little liquidity. So it's kind of -- and it's also a very small part of our debt portfolio. But it also has come up, but not to the same extent. So when we do, again, 3-month CPs on credit margin between 70 and 90 bps. So again, I think the summary is for long -- sorry, I'm answering long again, but it's a fairly stable credit -- during the quarter, we've seen fairly stable great margins.
What levels of market rental growth are you seeing aside from inflation? And is there a risk the tenants will start pushing back on higher rental increases led by inflation?
Market rent growth, we're seeing as signs of inflation. Well, if you look at the Oslo market, it's been pretty strong for the last couple of years, and we're still experiencing that. It's a good sentiment for taking out market rental growth. But -- but seeing that CPI has come so much up, I don't think we can expect to see the same development going forward. So I don't know if we are happy to see that. So we'll be able to take out CPI in the years to come. I think beating CPI is not going to be very realistic in the years to come. The second part was?
Is there a risk that the tenants will start pushing back on higher rental increases led by inflation?
Well, back to Anders' point earlier that Entra's portfolio is still underrented. So for us, it's more that inflation is helping us to catch up on market trends, giving us actually easier job to pick up on rents.
I believe that concludes the Q&A.
Thank you. Okay, thank you for joining us today.