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Avaldamise aeg 29 märts 2024 11:35:00 +0200
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Baltic_Horizon_Fund_2023-12-31_EN_audited.zip
BHF Annual Report_2023_EN 1.pdf
Baltic_Horizon_Fund_2023-12-31_ET_audited.zip
BHF Annual Report_2023_ET 1.pdf
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Valuuta
Pealkiri Baltic Horizon Fund consolidated audited results for 2023
Tekst
Management  Board  of  Northern  Horizon  Capital  AS  has  approved the audited
financial  results  of  Baltic  Horizon  Fund  (the Fund) for the year 2023. The
financial  results remained unchanged compared  to the preliminary disclosure on
15 February 2024.

Executing our strategy

In  a challenging economic  landscape characterized by  inflation, interest rate
volatility,  and  recent  geopolitical  events,  the  Fund  has assessed various
strategic  options to navigate these complexities and ensure future growth. Over
the  past  year,  our  focus  has  been  on  reshaping  our  strategy  to foster
sustainable  value, concentrating efforts  on avenues that  promise reliable and
consistent  growth for our investors. In  light of prevailing market conditions,
we  firmly  believe  that  the  execution  of  the  'Modern City Life' strategy,
introduced to investors in summer 2023, is paramount to their best interests.

In  the coming years,  we expect two  thirds of the  Fund's NOI to come from the
centrally  located 'Modern City Life'  multi-functional assets. These spaces are
meticulously designed to ignite, elevate and enrich the lives of modern citizens
and communities. The remaining results are expected to be derived primarily from
government-rented  premises and select suburban supermarkets and other segments.
Our  value  proposition  hinges  on  quality,  flexibility,  sustainability, and
remarkable  service,  underpinned  by  strategic  locations tailored to meet the
evolving needs of our clientele.

The focus of the Fund management team is and will be on these major objectives:

  * Portfolio occupancy of at least 90% by end of 2024;
  * Loan-to-Value target at 50% or lower and repayment of the bonds maturing in
    2024;
  * To consider disposing of non-strategic assets over the next 18 months;
  * Clear ESG and refurbishment strategy for the next 1-2 years with an aim to
    reach the portfolio's NOI potential of EUR 18 million by 2027;
  * Maintaining 100% BREEAM or LEED certified portfolio;
  * Achieving not less than 4 stars from GRESB assessment.

In order to reach those targets, the Fund has been investing in the new concepts
of  our centrally  located assets  and already  introduced the  first new anchor
tenants such as ARKET, H&M Home, IKI and food halls Dialogai and BURZMA into the
properties.  The Fund has  been decreasing its  vacancies in Q4 2023-Q1 2024 and
while  there  could  be  some  fluctuations  in  the  occupancy  over the coming
quarters, considering the ongoing lease negotiations with several anchor tenants
and  with the  recently signed  new leases  of more  than 13,000 sq. m including
those in Upmalas Biroji and Meraki, we believe that the portfolio occupancy goal
of  90% is attainable  as many  of the  new tenants  are able  to move in during
2024. Most  of the new leases will start  generating rental income from Q2 2024
onwards.

Equally  importantly,  the  management  team  has  been  able to renegotiate the
majority  of expiring bank  loans and in  some cases refinance  at more suitable
terms.  Additionally, we  have divested  mature Lithuanian  assets in Duetto and
Domus  PRO, yielding double-digit  returns for our  investors. These initiatives
align with our goal of fully repaying the short-term portion of the bonds issued
in May 2023. The Fund is in good cooperation with the bondholders and has an aim
to  further improve its  capital structure during  2024, positioning the Fund to
seize opportunities presented by the evolving market landscape.

Outlook

An  important milestone in our financial journey  was the refinancing of our EUR
50 million  bond issue in Q2 2023. We carried  out a new bond issue, raising EUR
42 million  to optimize our  capital structure. The  first tranche, amounting to
EUR  20 million,  matures  in  May  2024. Following  the  disposal of the Duetto
properties,  the Fund proactively redeemed EUR  7.5 million of the first tranche
in August 2023.

Our  management team  remains committed  to exploring  additional divestment and
refinancing  opportunities aimed at repaying the outstanding EUR 12.5 million of
the  first tranche before  its maturity date.  In line with  this commitment, we
have  successfully negotiated new loans with Shiauli? bankas for Europa and North
Star,  resulting in an increase in the outstanding loan amounts for these assets
by  EUR 8.6 million. The majority of received cash from these bank loans will be
allocated  towards bond redemption  and lowering the  overall cost of financing.
The  Fund has already announced a bond  redemption of EUR 4.5 million on 8 April
2024.

Given  the  substantial  increase  in  Meraki  occupancy  levels,  the  Fund  is
strategically  poised  to  explore  leveraging  opportunities  for  this  asset.
Presently,  our management team is actively  engaged in discussions with leading
banks  across Lithuania to assess potential financing options. The proceeds from
bank  financing would be mainly used for the repayment of the outstanding short-
term bond tranche.

Management  is also proactively negotiating with  banks to extend the short-term
loans  of Galerija Centrs  and LNK Centre.  The team is  working to create a new
strategy for the properties, which would strengthen their cash flow position and
would allow securing financing at better conditions.

Looking  ahead, the Fund is determined  to execute multiple early redemptions of
bonds  in  2024 through  a  combination  of refinancing activities and potential
asset  disposals. These  actions are  aligned with  our overarching  strategy to
gradually  reduce leverage levels, with the ultimate goal of reaching a leverage
ratio  of approximately 50% or lower after all planned refinancing activities in
2024.

Baltic Horizon achieves a 100% BREEAM certified portfolio
Baltic  Horizon  Fund  announced  the  successful  BREEAM  certification  of its
remaining  retail assets thus becoming a member of an elite group of Baltic real
estate  investment companies  to certify  its entire  portfolio according to the
highest  international environmental standards. The portfolio currently consists
of  12 properties.  The  last  to  receive  its  certification  was the historic
building of Galerija Centrs in Riga that received an impressive BREEAM Very Good
certification.

GRESB benchmarking
In  Q3 2023, Baltic  Horizon maintained  the GRESB  4-star rating for the second
year  in a row. In the assessment, the  Fund achieved a total score of 82 out of
100, representing  the  third  highest  GRESB  score  in  the 'Northern Europe |
Diversified  -  Office/Retail  |  Listed'  peer  group.  The  GRESB  Real Estate
Assessment  is an investor  driven global ESG  benchmark and reporting framework
for  listed property companies, private property funds, developers and investors
that  invest directly in real estate.  The achievement of GRESB ratings confirms
the Fund's continuous efforts in the ESG field.

Net result and net rental income
In  2023, the Group recorded a net loss of EUR 23.0 million against a net profit
of  EUR  3.9 million  for  2022. The  net  result  was  strongly impacted by the
negative  valuation result of EUR  21.9 million. In 2022, the valuation resulted
in  a net fair value loss of EUR 2.9 million. The sale of the shares in BH Domus
Pro  UAB, which owns  a retail park  and an office  building, and BH Duetto UAB,
which  owns two office buildings,  resulted in the loss  on disposal of EUR 4.0
million.  The net  result was  also impacted  by the  higher financial expenses.
Earnings  per unit for  2023 were negative at  EUR -0.19 (2022:  positive at EUR
0.03). Audit  expenses for 2023 amounted to EUR 163 thousand and remained at the
same level as in the previous year (2022: EUR 162 thousand).

The  Group earned net rental income of EUR 14.6 million in 2023 (2022: EUR 17.4
million).  The results  for 2023 include  two months'  net rental  income of the
Domus  Pro Retail  and Office  property (EUR  0.3 million) and  five months' net
rental  income of  the Duetto  properties (EUR  1.2 million), which were sold in
February and May 2023, respectively. The net rental income of the same portfolio
mix (like-for-like portfolio) remained at a level similar to the previous year.

On  an EPRA like-for-like basis, portfolio  net rental income was slightly below
the  previous  year  (-0.2%), mainly  due  to  vacancies in office properties in
Latvia due to the expiry of the agreement with the main tenant in Upmalas Biroji
BC and EMERGN's decision to reduce their rented area in LNK Centre.

Investment properties
At  the end of 2023, the Baltic Horizon Fund portfolio consisted of 12 cash flow
generating  investment properties in the Baltic  capitals. The fair value of the
Fund's portfolio was EUR 250.4 million (31 December 2022: EUR 333.1 million) and
incorporated a total net leasable area of 119.7 thousand sq. m.  During 2023 the
Group  sold the Domus  PRO buildings for  approximately EUR 23.5 million and the
Duetto  I and Duetto II buildings for approximately EUR 37 million, invested EUR
1.1 million  in  reconstruction  projects  and  EUR  2.3 million in the existing
property portfolio.

Gross Asset Value (GAV)
At  the end of 2023, the Fund's GAV was EUR 261.1 million (31 December 2022: EUR
344.0 million),  24.1% lower than  at the  end of  2022. The decrease  is mainly
related  to the sale of the shares in BH Domus Pro UAB and BH Duetto UAB and the
negative property revaluation.

Net Asset Value (NAV)
At  the end of 2023, the Fund's NAV was EUR 109.5 million (31 December 2022: EUR
133.7 million).  Compared  to  the  year-end  2022, the  Fund's NAV decreased by
18.0%. The  operational performance  result was  offset by  the EUR 21.9 million
loss on property valuations and EUR 4.0 million loss from the disposal of the BH
Domus  Pro UAB and BH Duetto UAB shares.  These were the main factors behind the
fall  in the Fund's NAV. Excluding the impact  of valuations, the NAV at the end
of  2023 would have  been EUR  131.4 million or  EUR 1.098 per  unit. As  of 31
December  2023, IFRS NAV per unit decreased to EUR 0.9156 (31 December 2022: EUR
1.1172), while  EPRA net tangible  assets and EPRA  net reinstatement value were
EUR  0.9546 per unit (31 December 2022: EUR 1.1865). EPRA net disposal value was
EUR 0.9122 per unit (31 December 2022: EUR 1.1143).

Interest-bearing loans and bonds
As  of  31 December  2023 interest-bearing  loans  and  bonds  (excluding  lease
liabilities)  were  EUR  143.5 million  (31  December  2022: EUR 194.6 million).
Outstanding  bank loans  decreased due  to the  repayment of  the Domus  Pro and
Duetto  loans,  part  of  Europa  and  Kontor  SIA  loans  and regular bank loan
amortisation.  Also, the Fund redeemed a part of  the bonds in the amount of EUR
7.5 million on 1 August 2023. The redemption was accompanied by the reduction of
the  nominal value  of the  bonds to  EUR 82,142.85 per  bond. The total nominal
amount  of the  bonds before  the redemption  was EUR   42,000,000 and after the
redemption  is EUR  34,499,997. Annual loan  amortisation accounted  for 1.4% of
total debt outstanding.

Cash flow
Cash  inflow from core operating activities in 2023 amounted to EUR 10.8 million
(2022:  cash inflow of EUR 15.3 million).  Cash inflow from investing activities
was EUR 20.4 million (2022:  cash outflow of EUR 9.7 million) due to the sale of
the  shares in BH Domus  Pro UAB and BH  Duetto UAB. Cash outflow from financing
activities  was EUR  30.4 million (2022:  cash outflow  of EUR 16.4 million). In
2023, the  Fund redeemed and issued bonds, repaid  the Domus Pro and part of the
Europa  loan, and paid regular interest on bank loans and bonds. In March 2023,
the Fund repaid the Domus Pro loan (EUR 11.0 million) and EUR 6.0 million of the
Europa  loan using the proceeds from the sale of the shares in BH Domus Pro UAB.
In  May  the  Fund  redeemed  its  EUR  50 million  unsecured 5-year bond issue,
completed  a private  placement of  5-year bonds  and issued  bonds in the total
volume  of EUR 42 million. In August the Fund early redeemed a part of the bonds
in  the  amount  of  EUR  7.5 million.  During  August,  the  Fund  successfully
refinanced the Kontor SIA loan until 2028, reducing the original Kontor SIA loan
by  EUR 1.2 million. At the  end of 2023, the Fund's  consolidated cash and cash
equivalents amounted to EUR 6.2 million (31 December 2022: EUR 5.3 million).

Key earnings figures

 EUR '000                                           2023        2022 Change (%)
-------------------------------------------------------------------------------
 Net rental income                                14,617      17,430    (16.1%)

 Administrative expenses                         (2,617)     (3,133)    (16.5%)

 Losses on disposal of investment properties     (4,047)       (423)   (856.7%)

 Valuation losses on investment properties      (21,876)     (2,914)   (650.7%)

 Operating (loss) profit                        (13,879)      11,238   (223.5%)

 Net financial expenses                          (9,750)     (6,311)    (54.5%)

 (Loss) profit before tax                       (23,629)       4,927   (579.6%)

 Income tax                                          656       (983)     166.7%
-------------------------------------------------------------------------------
 Net (loss) profit for the period               (22,973)       3,944   (682.5%)
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 Weighted average number of units
 outstanding (units)                         119,635,429 119,635,429          -

 Earnings per unit (EUR)                          (0.19)        0.03          -
-------------------------------------------------------------------------------

Key financial position figures

 EUR '000                                     31.12.2023  31.12.2022 Change (%)
-------------------------------------------------------------------------------
 Investment properties in use                    250,385     333,123    (24.8%)

 Gross asset value (GAV)                         261,138     343,963    (24.1%)



 Interest-bearing loans and bonds                143,742     194 569    (26.3%)

 Total liabilities                               151,606     210,308    (27.9%)



 IFRS Net asset value (IFRS NAV)                 109,532     133,655    (18.0%)

 EPRA Net Reinstatement Value (EPRA NRV)         114,205     141,943    (19.5%)
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 Number of units outstanding (units)         119,635,429 119,635,429          -

 IFRS Net asset value (IFRS NAV) per unit
 (EUR)                                            0.9156      1.1172    (18.0%)

 EPRA Net Reinstatement Value (EPRA NRV) per
 unit (EUR)                                       0.9546      1.1865    (19.5%)
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 Loan-to-Value ratio (%)                           57.3%       58.4%          -

 Average effective interest rate (%)                5.2%        3.0%          -
-------------------------------------------------------------------------------



During  2023, the  average  actual  occupancy  of the portfolio was 83.7% (2022:
92.1%). The  occupancy  rate  as  of  31 December  2023 was  81.1% (31  December
2022: 90.5%). The decrease in occupancy rate over the year was mostly influenced
by  the expiry of  the agreement with  the main tenant  in Upmalas Biroji BC and
EMERGN's  decision  to  reduce  their  rented  area  in LNK Centre. The Fund has
successfully  managed to sign a long-term lease  for 4,128 sq. m in the renowned
Upmalas  Biroji  building  with  the  anchor  tenant Latvian State Police, which
partially  filled  the  space  vacated  by  SEB  in  August 2023. Some new lease
agreements  were also  signed in  the Meraki  office building  in Q4 2023 and Q1
2024 for a total area of approx. 5,102 sq. m.

As part of its strategy for the development of existing properties, the Fund has
chosen  new partners to manage  its office and retail  properties in Latvia. The
management  team believes that this change will  speed up the leasing process in
Latvia.

Overview of the Fund's investment properties as of 31 December 2023

                                                 Direct        Net
                               Fair            property    initial
 Property name Sector      value(1)     NLA       yield      yield
                                                                      Occupancy
                         (EUR '000) (sq. m)     2023(2)    2023(3)         rate
-------------------------------------------------------------------------------
 Vilnius,
 Lithuania

 Europa SC     Retail        36,437  17,047        3.8%       4.2%        84.5%

 North Star    Office        20,028  10,579        7.1%       7.2%        99.7%

 Meraki        Office        16,340   8,162        0.3%       0.4%        47.7%
-------------------------------------------------------------------------------
 Total Vilnius               72,805  35,788        4.4%       4.6%        80.6%
-------------------------------------------------------------------------------
 Riga, Latvia

 Upmalas       Office
 Biroji BC                   20,478  11,212        5.5%       6.4%        57.7%

 Vainodes I    Office        16,710   8,128        6.6%       8.2%       100.0%

 LNK Centre    Office        13,960   7,450        4.7%       5.0%        42.8%

 Sky SC        Retail         5,660   3,259        8.2%       7.5%       100.0%

 Galerija      Retail
 Centrs                      64,592  19,306        2.8%       3.2%        80.4%
-------------------------------------------------------------------------------
 Total Riga                 121,400  49,355        4.2%       4.8%        74.1%
-------------------------------------------------------------------------------
 Tallinn,
 Estonia

 Postimaja &
 CC Plaza      Retail
 complex                     19,810   9,232        3.7%       5.5%        95.6%

 Postimaja &
 CC Plaza      Leisure
 complex                     13,240   9,139        6.7%       6.1%        94.3%

 Lincona       Office        14,370  10,775        6.6%       7.3%        83.5%

 Pirita SC     Retail         8,760   5,425        6.1%       8.6%        97.1%
-------------------------------------------------------------------------------
 Total Tallinn               56,180  34,571        5.2%       6.5%        91.7%
-------------------------------------------------------------------------------
 Total
 portfolio                  250,385 119,714        4.5%       5.1%        81.1%
-------------------------------------------------------------------------------

 1. Based on the latest valuation as of 31 December 2023 and recognised right-
    of-use assets.
 2. Direct property yield (DPY) is calculated by dividing annualized NOI by the
    acquisition value and subsequent capital expenditure of the property.
 3. The net initial yield (NIY) is calculated by dividing annualized NOI by the
    market value of the property.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME



 EUR '000                                                         2023     2022
-------------------------------------------------------------------------------
 Rental income                                                  17,743   20,482

 Service charge income                                           6,008    5,974

 Cost of rental activities                                     (9,134)  (9,026)
-------------------------------------------------------------------------------
 Net rental income                                              14,617   17,430



 Administrative expenses                                       (2,617)  (3,133)

 Other operating income                                             44      278

  Losses on disposal of investment properties                  (4,047)    (423)

  Valuation losses on investment properties                   (21,876)  (2,914)
-------------------------------------------------------------------------------
 Operating profit (loss)                                      (13,879)   11,238
-------------------------------------------------------------------------------


 Financial income                                                  104        1

 Financial expenses                                            (9,854)  (6,312)
-------------------------------------------------------------------------------
 Net financial expenses                                        (9,750)  (6,311)
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 Profit (loss) before tax                                     (23,629)    4,927
-------------------------------------------------------------------------------
 Income tax charge                                                 656    (983)
-------------------------------------------------------------------------------
 Profit (loss) for the period                                 (22,973)    3,944
-------------------------------------------------------------------------------


 Other comprehensive income that is or may be reclassified to profit or loss in
 subsequent periods

 Net gain (loss) on cash flow hedges                           (1,273)    2,746

 Income tax relating to net gain (loss) on cash flow hedges        123    (236)
-------------------------------------------------------------------------------
 Other  comprehensive income (expense), net  of tax, that is
 or  may  be  reclassified  to  profit or loss in subsequent
 periods                                                       (1,150)    2,510
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 Total comprehensive income (expense) for the period, net of
 tax                                                          (24,123)    6,454
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 Basic and diluted earnings per unit (EUR)                      (0.19)     0.03
-------------------------------------------------------------------------------



CONSOLIDATED STATEMENT OF FINANCIAL POSITION

  EUR '000                                    31.12.2023   31.12.2022
----------------------------------------------------------------------
  Non-current assets

  Investment properties                          250,385      333,123

  Intangible assets                                   11            6

  Property, plant and equipment                        4            1

  Derivative financial instruments                   295        2,228

  Other non-current assets                           647            -
----------------------------------------------------------------------
  Total non-current assets                       251,342      335,358
----------------------------------------------------------------------


  Current assets

  Trade and other receivables                      2,591        2,693

  Prepayments                                        402          273

  Derivative financial instruments                   621          292

  Cash and cash equivalents                        6,182        5,347
----------------------------------------------------------------------
  Total current assets                             9,796        8,605
----------------------------------------------------------------------
  Total assets                                   261,138      343,963
----------------------------------------------------------------------


  Equity

  Paid in capital                                145,200      145,200

  Cash flow hedge reserve                            531        1,681

  Retained earnings                             (36,199)     (13,226)
----------------------------------------------------------------------
  Total equity                                   109,532      133,655
----------------------------------------------------------------------


  Non-current liabilities

  Interest-bearing loans and borrowings           64,158      124,017

  Deferred tax liabilities                         2,774        7,490

  Other non-current liabilities                    1,079        1,240
----------------------------------------------------------------------
  Total non-current liabilities                   68,011      132,747
----------------------------------------------------------------------


  Current liabilities

  Interest-bearing loans and borrowings           79,584       71,094

  Trade and other payables                         3,343        5,644

  Income tax payable                                   6           10

  Other current liabilities                          662          813
----------------------------------------------------------------------
  Total current liabilities                       83,595       77,561
----------------------------------------------------------------------
  Total liabilities                              151,606      210,308
----------------------------------------------------------------------
  Total equity and liabilities                   261,138      343,963
----------------------------------------------------------------------



For more information, please contact:

Tarmo Karotam
Baltic Horizon Fund manager
E-mail tarmo.karotam@nh-cap.com
www.baltichorizon.com

The  Fund is a registered contractual public closed-end real estate fund that is
managed  by Alternative Investment Fund  Manager license holder Northern Horizon
Capital  AS. Both  the Fund  and the  Management Company  are supervised  by the
Estonian Financial Supervision Authority.

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This announcement contains information that the Management Company is obliged to
disclose  pursuant  to  the  EU  Market  Abuse  Regulation.  The information was
submitted  for publication,  through the  agency of  the above  distributors, at
11:35 EET on 29 March 2024.