Summary of Realica Properties' strategy plan for 2022-2026:

After many years of steady rental revenue increase, a good profitability, and a high market value growth, we experienced some years ago that the positive development stopped. Even if we choose to disregard the effect of the pandemic, our total financial value creation the recent years have been challenged by an increasing level of vacant office and shop areas and increased costs for management, operations, and maintenance.

While many financial analysts for many years kept Realica Properties ASA on their list of recommended investments, things changed around 2019. Several negative articles in business media also contributed to the impression that the company no longer was the investors' first choice for a diversified real estate placement.

Early 2021, The Board of Directors gave the new management team a clear mandate; it shall in addition to securing a good and stable return to our investors, also have a constant focus on finding new and attractive customers that demand high quality standards.

In the forthcoming strategy period, we must focus on consolidation rather than growth. To improve the company's solidity, we must sell approximately 15 per cent of our real estate portfolio. The cash that is left after the mortgage loans on these properties are paid will be used to reduce the borrowings on the remaining properties, particularly where the current loan to value ratio is uncomfortably high. The goal is that the mortgage loan balance of one of our properties should be between 40 and 60 per cent of the expected market value.

Real estate is a capital-intensive industry, and the total market value of our portfolio is more than 20 billion kroner. The focus we have had on following up our Return on Equity has not given us the right picture of the company's profitability. We cannot influence the Capital Turnover Rate much in the coming years, and we must therefore strive to influence The Rate of Return on Sales as much as possible in the strategy period that lies ahead of us. We know that this is influenced not only by the average rent level, but also by the vacancy rate, cost of management, operations, and management, as well as the interest level. Thus, we must ensure that the development of these factors is positive and sustained over time.

Although we have many experienced and highly competent people in our organization, we see a strong need to increase the company's human capital to be better prepared for the changes that are ahead of us. While we for many years had an entrepreneurial type of organizational culture, we see that the organization now suffers from lengthy decision processes and the lack of a commercial business spirit. This may have caused our gradual loss of market development skills and given rise to the loss of many customers when they have chosen not to renew their contracts after the first 5- or 10-year rent period has ended. This trend cannot continue! We must prioritize activities that increase the tenants' retention rate, because when we lose customers, it will take many years before we can try to win them back.

We need to make development and maintenance plans with corresponding budgets for each of our 24 properties, so we can plan for an increased attractivity for each object and secure a high rent level in the future. The increased focus on development and maintenance will not happen without an increased know-how and a good administrative capacity to develop well-functioning internal control systems for the property management.

We also need to strengthen our competence within the finance and accounting areas and develop better routines and systems for the daily handling of accounting transactions. Each property will now be an individual profit center where one of the six members of Top Management will have the overall responsibility. Hence, each manager will have a portfolio of four properties to follow up. Empowered to make the necessary operational decisions daily, the manager is responsible for

reporting the status to the management team. We hope that this will reduce the number of decisions that the Top Management team will have to make, and that we now can speed up the decision processes significantly.

Realica Properties ASA will also need to strengthen its professional network in the forthcoming years. We have lost many valuable contacts when former managers left the company, and we need to build up a good external network within banking and financing, law competence, and real estate engineering.

We need to convince the investors that we can give the best return in the real estate sector, and we think it is realistic to achieve a Return on Investments of around 10 per cent by the end of the strategy period. Together we shall make Realica the most attractive company in the market, both for our investors and customers, and for us who work here!

Qn1 : Identify critical success factors in Realica Properties ASA's strategy from 2022-2026 and place them in the correct strategic perspectives used in a Balanced Scorecard model.

Qn2: Design a strategy map based on your conclusions in Qn 1