Norwegian Property ASA has acquired four office and retail properties at Aker Brygge, CBD in Oslo, for NOK 1,740 million (approx. €203 mln) from DnB NOR Bank ASA.
The properties consist of approximately 31,736 m² of mainly office and retail/restaurant premises. The estimated gross rental income for 2007 is approximately NOK 82.5 million (ca. €9.6m) and net rental income is approximately NOK 77.4 million (ca. €9m). The purchase price is based on a property value of 1,754. The main tenant is DnB NOR Bank ASA (82% of rental income) and they have a four year contract with right to extend at market conditions. The rest of the tenants is mainly shops and restaurants and they have an average duration of 4,4 years. The DnB NOR Bank's head quarter is situated at Aker Brygge and there is no vacancy in the properties. 100% of the total portfolio is CPI adjusted annually. The properties were purchased at a net yield of approximately 4.5% on contract rent 2007/2008. Following the acquisition, Norwegian Property is the largest property owner at Aker Brygge.
Norwegian Property believes that the properties have been purchased at an attractive yield level given the market rent development recently. The office contract rent is around NOK 2,700 per m² while today's market rent is around NOK 3,500 per m² on average. Recently, Norwegian Property renegotiated one of its existing contracts at a rent of NOK 4,300 per m² and the market rent is expected to increase up to around NOK 5,000 during a few years. Implied yield on current market rent for the DnB NOR properties are approximately 5.8%.
The Aker Brygge area is one of the most attractive business/shopping- and residential areas in the city of Oslo. Several hundred companies are located in the Aker Brygge area and more than 5,000 live and work at Aker Brygge. Aker Brygge is a major attraction for residents and tourist attracting more than 14 million visitors each year. Aker Brygge has excellent communications and walking distance towards the inner city, with railway and underground station only minutes away. Ferries and trams are arriving at Aker Brygge several times every hour all day long.
Both commercial and residential property prices have been rising rapidly in the area during the past few years. Due to this Norwegian Property expects a positive valuation development for the properties purchased at Aker Brygge.
"Norwegian Property regards the transaction as attractive for the company both financially and operationally. After the transaction will have an even stronger position in the CBD in Oslo. The properties are purchased at an attractive yield level in relation to re-negotiation potential of rental contracts at high market rent level in the years to come. Current contract rent is around NOK 2,700 and market reports project it to rise to around NOK 5,000 within few years. Properties at Aker Brygge are considered to be some of the most attractive in whole country and we are glad to get a large and solid tenant like DnB NOR in our portfolio," says Petter Jansen, CEO of Norwegian Property.
The transaction will be completed in 3rd quarter 2007.
Source: Norwegian Property