Results 3rd Quarter 2008 24 October 2008 www.npro.no www.norwegianproperty.no
Highligths – Q3 2008 � Steady operational performance – Rental income totalled MNOK 454.6 in Q3 2008 (MNOK 253.1 in Q3 2007) – Earnings before tax, value adjustments and interest on acquisition financing came to MNOK 112.8 (MNOK 81.1) – Loss before tax was MNOK 1,371.9 after value adjustments, change in market value of derivatives and interest on acquisition financing � Major changes in macroeconomic environment – Consumer Price Index of over 5% probable basis for office rent adjustment – Long term interest rates reduced – Short term interest rates expected to drop sharply – Growth expectations slowing � Net asset value per share (EPRA) was NOK 34.71 after equity issue and value adjustments – Negative change in market value of financial derivatives MNOK 435.7 (total value MNOK 591.7 per Q3) – Loss on fair value adjustments properties MNOK 1,002.8 in Q3 (total market value NOK 27,743) – Net yield based on current rent (run rate 2008) 6.2 % – Net yield based on inflation adjusted rent 2009 (initial run rate 2009) 6.4 % � Several new rental renewals securing significant rental uplift with minimal investments – Badehusgaten 33-39, Stavanger, tenant has called option for extension of contract with 5 years at market price, total area appr. 21,500 sqm – Drammensveien 134, appr. 4,700 sqm with rental uplift of mnok 3 (50%) from October 2009 (duration 3 years) � Agreed sale of Grev Wedels Plass 9 at property value of NOK 773 million (5.5% net yield based on 2008 run rate and 5.8% based on inflation adjusted rent for 2009) � Rights offering with gross proceeds of MNOK 2,500 completed in July. 2 | Results 3rd Quarter 2008
Results – Q3 2008 Q3 Q3 Q1-Q3 Q1-Q3 Full year NOK million 2008 2007 2008 2007 2007 Gross rental income 454.6 253.1 1,400.8 745.5 1,195.7 Maintenance and property related cost -38.8 -17.7 -112.8 -46.0 -81.4 Administrative and group expenses -28.2 -14.0 -94.1 -45.3 -77.9 Operating result before value adjustment 387.6 221.5 1,193.8 654.2 1,036.3 Net financial items excluding derivatives 1) and 2) -274.8 -140.4 -826.9 -563.6 -825.2 Profit before value adjustments and acq. financing 112.8 81.1 366.9 90.6 211.1 Net financial items , acquisition financing -46.2 -0.1 -165.7 -0.1 -65.7 Profit before value adjustments, gains and tax 66.6 81.0 201.2 90.5 145.4 Net gain on disposals 0.0 0.0 35.4 0.0 9.3 Net gain/loss on value adjustements, investment properties -1,002.8 68.9 -2,812.2 1,126.4 1,219.1 Change in market value of financial derivatives -435.7 -97.8 -35.0 322.3 276.7 Porfit before income tax -1,371.9 52.1 -2,610.7 1,539.2 1,650.6 Income tax 381.4 -14.6 728.8 -431.0 -460.7 Profit for the period -990.6 37.5 -1,881.9 1,108.2 1,189.9 Earnings per share (NOK) -4.91 0.36 -13.22 10.85 11.46 1) Net financial items in Q3-2008 include exchange rate loss relating to debt of NOK 10.2 million 2) Net financial items include interest expenses relating to mnok 450 acquisition financing facility (which was repaid in August 2008) 3 | Results 3rd Quarter 2008
Result by business entity – Q3 2008 NPRO NPRO Norgani Norgani *) OPAS TOTAL NOK million Q3-2008 Q3-2007 Q3-2008 Q3-2007 Q3-2008 Q3-2008 Gross rental income 264.1 242.2 190.5 167.1 - 454.6 Termination rental guarantee agreement - - - 36.9 - - Gross rental income 264.1 242.2 190.5 204.0 0.0 454.6 Maintenance and property related cost -19.2 -16.7 -19.6 -14.1 0.0 -38.8 Administrative and group expenses -15.8 -12.8 -12.4 -68.3 0.0 -28.2 Operating result before value adjustment 229.1 212.6 158.5 121.6 0.0 387.6 Net financial items excluding derivatives -188.3 -135.4 -86.5 -76.5 0.0 -274.8 Net financial items , acquisition financing 0.0 0.0 0.0 0.0 -46.2 -46.2 Profit before value adjustments, gains and tax 40.8 77.2 72.0 45.1 -46.2 66.6 Net gain on disposals 0.0 0.0 0.0 0.3 0.0 0.0 Net gain/loss value adjustments, investment properties -619.4 68.9 -383.4 0.7 0.0 -1,002.8 Change in market value of financial derivatives -275.4 -94.2 -160.3 -55.2 0.0 -435.7 Profit before income tax -854.0 51.9 -471.6 -9.0 -46.2 -1,371.9 *) Norgani's reported P&L for Q3-2007 NPRO = Offices and group administration Norgani = Norgani Hotels OPAS = Oslo Properties, acquisition financing + discounted interest on equity in OPAS 4 | Results 3rd Quarter 2008
Balance sheet – Q3 2008 MNOK 30-Sep-08 31-Dec-07 30-Sep-07 Investment properties 1) 27,379.7 31,113.9 28,701.3 Goodwill 1,099.9 1,065.0 0.0 Development properties (Aker Hus) 0.0 0.0 1,406.8 Market value financial derivatives (net) 591.7 662.1 694.9 Cash and cash equivalents (including equity issue) 68.6 635.5 924.1 Equity 6,973.0 6,830.9 6,825.0 Long term interest bearing debt 20,580.1 21,733.9 20,071.8 Short term interest bearing debt 745.0 1,498.2 1,383.5 Short term debt to owner's of Oslo Properties AS 2) 0.0 1,595.8 3,732.7 Deferred tax liability 763.1 1,521.8 305.6 Net other assets 78.7 295.9 -591.5 Equity ratio 23.6 % 20.2 % 20.7 % Net asset value per share (NOK) 34.58 63.20 62.30 Net asset value per share (NOK), EPRA 34.71 70.84 68.57 1) Net of deferred tax at acquisition. 2) Majority of minorities in Oslo Properties AS classified as debt due to put / call arrangements 5 | Results 3rd Quarter 2008
Financing NPRO ASA Property OPAS NPRO Proform. NPRO Interest bearing debt and hedging Office Norgani financing acq. financ. Group Group *) Total interest bearing debt (NOK million) 13,020 6,647 19,667 1,658 21,325 20,587 - of which hedged (NOK million) 11,391 4,755 16,146 0 16,146 16,146 Hedging ratio (%) 87% 72% 82% 0% 76% 78% Cash and cash equivalents 67 0 67 1 68 68 effective hedging ratio, including cash (%) 88% 72% 82% 0% 76% 79% Unused committed credit facilities (short and long term) 416 10 426 426 426 Average remaining duration, hedging (years) 4.8 4.3 4.7 0.0 4.7 4.7 Average interest (including margin) 5.33% 5.55% 5.40% 8.04% 5.61% 5.56% Average margin 0.57% 1.04% 0.73% 1.50% 0.79% 0.79% Average remaining duration, borrowing 4.5 3.8 4.3 2.0 4.1 4.1 Property value (gross of deferred tax at acquisition) 17,387 10,356 27,743 27,743 26,970 Loan To Value 74.9% 64.2% 70.9% 76.9% 76.3% *) Adjusted for sale of Grev Wedels Place, gross property value NOK 773 million 6 | Results 3rd Quarter 2008
Financing - key issues � Msek 565 facility in Norgani Hotels renewed for one year – Basically same terms as previous agreement – Margin initially increased to 110 bp; will increase to 175 bp if not refinanced by April 2009 � Restructured interest payment dates on key facilities in Norgani to match rental payments – Expected improvement in cash position at end of December, appr. mnok 50 � Major covenants – Loan to Value proforma after sale of Grev Wedels plass 76.9% – Head room for additional 10% drop in property values – Interest Cover Ratio, requirement 1.40 – Interest expenses on acquisition financing excluded from calculations – Debt Service Coverage Ratio, requirement 1.10 – Does not include LTV-triggered amortisations – Covenants on separate loan agreements � Debt maturing in 2009 and 2010 (11.8% of total interest bearing debt) – Msek 565 hotel financing (September 2009) – Mnok 302 office bond issue (March 2010) – Mnok 1,658 OPAS acquisition financing (October 2010) 7 | Results 3rd Quarter 2008
Norway - Macro forecasts GDP Consumer price index (CPI) Seasonally adjusted volume indices Consumer price index (CPI) Percentage change from same quarter last year Basis for office rental adjustment *) Total Mainland Norway Norway, CPI Euroland Industry Norway, CPI-ATE Percentage change 2006 2007 2008 2009 2010 2011 Percentage change 2006 2007 2008 2009 2010 2011 CPI 2.3 0.8 4.1 3.2 1.7 1.9 GDP 2.5 3.7 2.4 1.4 1.1 2.2 CPI - ATE 0.8 1.4 2.7 2.7 1.8 2.0 GDP Mainland 4.8 6.2 3.0 1.1 1.3 2.8 Wages 4.9 5.6 6.0 4.7 4.0 3.7 Industry 7.1 4.7 2.4 0.5 -0.9 1.3 Source: Statistisk Sentralbyrå Source: Statistisk Sentralbyrå *) Norwegian Property’s office rents are CPI adjusted every January 1, effective factor for total portfolio is 95% (based on index as of October and November) 8 | Results 3rd Quarter 2008
Long term swap rates (NOK) Current net yield NPRO property portfolio Quotes, October 23 NOK Swap, 10y 4.90% NOK Swap, 5y 4.66% NOK Swap, 3y 4.67% Source, Nordea Markets 9 | Results 3rd Quarter 2008
Short term interest rates (NOK) - 3 month NIBOR (implicit FRA pricing) 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 23Oct06 11Aug07 29May 08 17Mar09 03Jan10 22Oct10 NI BOR 3M I m plied Quotes, October 23 NIBOR FRA Dec-09 5.60% NIBOR FRA Mar-09 4.42% NIBOR FRA Jun-09 4.09% Source, Nordea Markets 10 | Results 3rd Quarter 2008
Exchange rate - major movements Quotes, October 23 EURNOK 9.15 DKKNOK 122.50 SEKNOK 91.00 Source, Nordea Markets - Net unhedged equity position in foreign currency per 30 September - Msek 1,400 (exchange rate 85.24) - Meuro 60 (exchange rate 8.33) - Mdkk 100 (exchange rate 111.69) - Will impact revenue and earnings positively going forward 11 | Results 3rd Quarter 2008
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