MANAGEMENT REPORT
General information
UPP Olaines OÜ (hereafter 'the Company') was established for the purpose of
funding, acquiring and managing the real estate investment of Olaines Logistics
Park: (buildings and land) located at "Sharlotes", Olaines county, Olaines
parish, Latvia, cadastre number 8080 003 0029, registered in the Land Register
compartment No.5439 of the city of Olaine parish. The Company was established on
24.08.2017 and had no economic activity until 15.12.2017, when it acquired the
cold storage warehouse Olaines Logistics Park.
The business performance is not affected by seasonal factors. The activities of
the Company have no environmental or social impact.
As the Company has been established solely for the purpose of funding, acquiring
and managing the property, no strategic changes in the business are planned.
The management board is aware of no trends, uncertainties, demands, commitments
or events that are reasonably likely to have a material effect on the Company's
prospects for the period after the reporting period of these financial
statements outside the course of its regular business activities.
UPP Olaines OÜ is operating based on going concern.
Management commentary for the period 24.08.2017 - 31.12.2018
The first and successful reporting period of the Group was marked by two
important events: acquisition of the investment property Olaines Logistics Park
and the successful listing of UPP Olaines OÜ bonds on Nasdaq Tallinn Bond
List.
UPP Olaines OÜ completed the acquisition of the investment property Olaines
Logistics Park on 15.12.2017. The property was chosen due to its fit with the
investment theme of United Partners Property OÜ, the parent company of UPP
Olaines OÜ: logistics real estate in an attractive location coupled with long-
term lease contracts with lessees who have a leading or dominant position within
their sector.
To finance the acquisition of the property, the Company issued secured
subordinated bonds in the total nominal value of 6.215 million euros. After a
non-public offering to Baltic institutional investors and high-net worth
individuals, the bonds were successfully listed and admitted to trading on
Nasdaq Tallinn Bond List on 29.11.2018.
Additionally, on 13.09.2018, a meeting of the shareholders and board of UPP
Olaines OÜ was held where it was decided to change the composition of the
management and supervisory board of UPP Olaines OÜ and its subsidiary, Olaines
Logistics SIA. The previous supervisory board member, Marko Tali, was appointed
as the chairman of the management board of UPP Olaines OÜ and Olaines Logistics
SIA, while both of the previous members of the management board, Hallar Loogma
and Kevin Soon, were discharged from their positions. Hallar Loogma was
appointed on the supervisory board of the Company. The changes in the management
and supervisory board of UPP Olaines OÜ were completed by 05.10.2018.
Marko Tali has been the head of investments in United Partners Investments OÜ,
the direct investment arm of United Partners Group OÜ. These changes were part
of the efforts to streamline the management of United Partners Group's
investments.
Financial overview
The consolidated net rental income for the period 24.08.2017 - 31.12.2018 was
2,607,869 EUR. During the same period the company generated 2,651,520 EUR in net
operating profit and 967,219 EUR in net profit. Due to the fact the company
acquired the investment company Olaines Logistics Parks and this is the first
audited consolidated report, the financial results can not be compared to
previous audited annual reports.
The administrative expenses amounted to 221,480 EUR which accounted for 8.5% of
the net rental income. The administrative expenses include expenses with one-off
nature, such as remuneration of transaction costs to the United Partners group
company in the amount of 100,000 EUR under consulting service expense, and the
cost of escrow account, establishment of mortgage and the loan disbursement fee
in the total amount of 32,627 EUR under banking services expense.
The company used independent appraisers to evaluate the the fair value of
Olaines Logistics Park investment property and during the reporting period
gained 362,000 EUR from revaluation of investment property.
The majority of the expense under 'Other income / (cost)' in the amount of
96,869 EUR occurred during 2016 and 2017 when UPP Olaines OÜ was not yet owner
of the investment company Olaines Logistics Parks SIA. The expense is of one-off
nature and was mainly caused by the deferred corporate income tax liability that
was accumulated on the balance sheets in anticipation of changes in calculation
and payment procedures of CIT that came with the new CIT legislation in Latvia
in 2018.
As at 31.12.2018, the company's total assets were in the amount of 31,489,267
EUR, including fair value of investment property, which accounted for 97.7% of
the total assets. As at 31.12.2018 the company's net debt was in the amount of
26,181,642 EUR. Net debt is calculated by the company's total borrowings less
cash and cash equivalents, and the subordinated loan granted by the parent
company United Partners Property OÜ.
No other significant events occurred in the period 24.08.2017 - 31.12.2018 and
all regular operations of the premise are running smoothly, including duly and
timely collection of rental and utilities payments from the tenants.
As of the end of 2018, there is no vacancy in the premises.
Compliance with bond terms
According to the Terms and Conditions of UPP Olaines OÜ Subordinated Note Issue
section 3.5.3 and 3.5.4, the Management confirms that the Group's debt service
coverage ratio on consolidated level is greater or equal than 1.1 for the the
period 24.08.2017 - 31.12.2018 and that there has been no occurence of an
Extraordinary Early Redemption Event in 10.11.2017 - 31.12.2018.
/Signed digitally/
Marko Tali
Chairman and Member of the Management Board of UPP Olaines OÜ
14.06.2019, Tallinn
Management board and supervisory board
The management board of UPP Olaines OÜ has one member: Marko Tali, the chairman
of the management board.
The supervisory board of UPP Olaines OÜ has three members: Mart Tooming, Tarmo
Rooteman, Hallar Loogma.
No remuneration or other benefits have been allotted to the members of the
management board and supervisory board.
There are no employees in the Company besides the members of the management and
supervisory board.
Key indicators of financial performance and position for period 24.08.2017 -
31.12.2018
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(in EUR) 24.08.2017 - 31.12.2018
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Net rental income 2,607,869
Operating profit 2,651,520
Profit for the period 967,219
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(in EUR) 31.12.2018 24.08.2017
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Investment property 30,762,000 0
Interest-bearing loans 29,656,633 0
Interest-bearing loans less shareholder loan 26,608,333 0
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24.08.2017 - 31.12.2018
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Net profit margin, % (Net profit / Net rental income) 37.1%
ROA (Net profit / Average total assets) 6.1%
DSCR (Operating profit / Loan principal and interest
payments on interest-bearing loans less shareholder
loan principal and interest payments) 1.3
CONSOLIDATED FINANCIAL STATEMENTS OF UPP OLAINES OÜ
Consolidated statement of comprehensive income
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(in EUR) Note 24.08.2017 - 31.12.2018
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Net rental income 6 2,607,869
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Net rental income 2,607,869
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General and administrative expenses 7 (221,480)
Gain / (loss) from revaluation of investment
property 12 362,000
Other income / (cost) (96,869)
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Operating profit 2,651,520
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Financial income / (cost) 8 (1,720,477)
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Profit before income tax 931,043
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Income tax 9 36,176
Profit for the period 967,219
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Total comprehensive income for the period 967,219
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The notes on pages 12 - 36 are an integral part of the financial statements.
Consolidated statement of financial position
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(in EUR) Note 31.12.2018 24.08.2017
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Cash and cash equivalents 10 426,691 2,500
Trade and other receivables 11 300,576 0
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Total current assets 727,267 2,500
Investment property 12 30,762,000 0
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Total non-current assets 30,762,000 0
TOTAL ASSETS 31,489,267 2,500
Trade and other payables 13 446,036 0
Financial derivatives 16 416,879 0
Loans and borrowings 15 1,064,004 0
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Total current liabilities 1,926,919 0
Loans and borrowings 15 28,592,629 0
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Total non-current liabilities 28,592,629 0
TOTAL LIABILITIES 30,519,548 0
Share capital 14 2,500 2,500
Retained earnings 967,219 0
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TOTAL EQUITY 969,719 2,500
TOTAL EQUITY AND LIABILITIES 31,489,267 2,500
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The notes on pages 12 - 36 are an integral part of the financial statements.
Siim Sild
Director
+372 5626 0107
siim.sild@unitedpartners.ee
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