Comment by Fund manager Viljar Arakas:
The financial results of EfTEN Real Estate Fund III AS in the first half of
2021 have been better than expected. The fund's EBITDA for the first six months
of this year totals 4.89 million euros, which is 27% higher than the EBITDA for
the same period last year. By the beginning of the year, the alarmingly rapid
spread of the coronavirus had severely limited business in Latvia and Lithuania,
and the outlook was pessimistic. In Estonia, significant movement restrictions
came into force in February. Nevertheless, we were able to keep all the fund's
assets running successfully - as far as restrictions allowed, and we applied
very strict controls on running costs.
In terms of management, the first half of the year focused primarily on our
customers / tenants. Client-specific solutions were found for all kinds of
business interruptions caused by the pandemic, and the occupancy rate of the
fund's rental space has been very good. As of the end of June, the vacancy rate
of the fund's real estate portfolio is only 0.7%. Despite the delays in payments
due to the corona crisis (mainly in the Saules Miestas shopping center), the
payment behavior of tenants has also been good. In connection with payment
behavior issues, we have also made agreements with the tenants to defer the
payments mostly until the end of August, and we have managed to keep the change
of tenants to a minimum.
It is also worth noting the successful issue of shares in the first half of the
year in the total amount of 15.13 million euros. A total of 4,564 subscription
orders were submitted in the issue and the issue was oversubscribed 3.6 times.
The costs of share issue were again minimal for the fund's investors, amounting
to only approximately 0.4% of the issue volume. The offer was made only in
Estonia and external advisers were minimally involved.
In the first half of 2021, we made additional investments in the fund's existing
portfolio, mainly in the territory of the Saules Miestas shopping center in
Shiauliai, Lithuania, where the fund's subsidiary built a separate KFC fast food
restaurant building. As fund managers, we are constantly looking for ways to
increase the value of our existing assets through additional developments. As an
additional example of such investments, we can cite the construction of a solar
park on the roof of Laagri Selver shopping center.
In the first half of the year, we made one new investment, acquiring two
industrial and industrial buildings in Panevezys, Lithuania, for a total of 10
million euros. The unleveraged entry yield of the transaction was 8.0% and the
purchase price of the building was 500 euros per square meter, which is below
the reconstruction value. The building is leased by ADAX UAB on the basis of a
16-year lease agreement. The transaction was financed by Siauliu banka in the
amount of 6 million euros.
The successful first half year of the fund allows us to look at the second half
2021 with an optimistic look.
Financial overview
The net asset value (NAV) of EfTEN Real Estate Fund III AS as of 30.06.2021 was
17.6021 euros, increasing by 3.6% in June. The net asset value of the EPRA share
(net book value excluding deferred income tax liability and fair value of
interest rate derivatives) as of 30.06.2021 was 18.60 euros. EPRA NAV increased
by 2.6% in June.
In June, the fund conducted its usual valuation of investment properties, during
which the value of the fund's real estate portfolio increased by 1.4% (2.020
million euros). The change in value was mainly due to improved cash flow
expectations in Saules Miestas and the Ulonu office building. The increase in
the value of other objects was mainly due to the decrease in exit yield by half
or a quarter of a percentage point.
In June, EfTEN Real Estate Fund III AS earned a total of 1,097 thousand euros in
consolidated sales revenue, which is 57 thousand euros more than in May,
including 15-day rental income from industrial buildings acquired in June in
Panevezys, Lithuania. In addition, due to the phasing out of Covid-19
restrictions in June, rental income from the Saules Miestas shopping center
increased, which is now still on average 4% below normal levels.
The fund's consolidated EBITDA was 827 thousand euros in June, which is 26
thousand euros lower than in May due to the acquisition of the industrial
buildings in Panevezhys and the related expenses and expenses related to the
share issue.
During the six months of this year, the fund has earned EBITDA of 4.89 million
euros (2020: 3.83 million euros) with sales revenue of 5.96 million euros (2020
6 months: 4.86 million euros). EBITDA has increased by a total of 1.06 million
euros compared to the previous year, of which 740 thousand euros has been
brought about by the addition of new real estate investments. The EBITDA of the
existing real estate portfolio before new investments during the 6 months of
this year (like-for-like) has been 3.8 million euros , which is 0.32 million
euros (9%) more than in the same period last year.
The consolidated overdue debt of the fund was 148 thousand euros as of 30 June,
decreasing by 43 thousand euros, compared to May. The overdue debt is fully
related to the deferred debt of Saules Miestas, which will continue in part
until the end of August.
The consolidated cash balance of the fund increased by 3.574 million euros in
June and was 9.9 million euros as of 30.06.2021. In June, we repaid the parent
company's bank loan of 3.1 million euros , that was taken for Pirita elderly
home investment in December 2020. Also, we partly repaid the EfTEN Riga Airport
SIA bank loan of 0.9 million euros from the funds received from the share issue
to comply with bank loan covenants and made an investment in Panevezys
industrial buildings, which required 4,011 thousand euros of equity. As of the
end of June, the fund has 7.1 million euros of uninvested capital.
The consolidated equity of EfTEN Real Estate Fund III AS was 89.287 million
euros as of 30.06.2021 (31.12.2020: 71.483 million euros).
Marilin Hein
CFO
Phone 655 9515
E-mail: marilin.hein@eften.ee (mailto:marilin.hein@eften.ee)
|