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.
To receive Nasdaq announcements and news from Baltic Horizon Fund about its
projects, plans and more, register on www.baltichorizon.com
(https://www.globenewswire.com/Tracker?data=BKmCnx1cI6Z0i0PWdydPGXcNBi-
xfnf8I1jZNEThbSSZgDQ0vTQLmnUaYKhPQ_74CeR7QDrSalifdJMsZoO5EpacEzd71KuphfGMWCFx4N8
=). You can also follow Baltic Horizon Fund on www.baltichorizon.com
(https://www.globenewswire.com/Tracker?data=BKmCnx1cI6Z0i0PWdydPGXcNBi-
xfnf8I1jZNEThbSSZgDQ0vTQLmnUaYKhPQ_74CeR7QDrSalifdJMsZoO5EpacEzd71KuphfGMWCFx4N8
=) and on LinkedIn
(https://www.globenewswire.com/Tracker?data=fAtj9ulqnq3TWFix9GxpYNmPgRiMY8IWuwM0
BjFi8Pu-
jkxMrvBsdKI3PUOWKAifhzrLjJWCJFn59gacQUSHRmKXkP8DYjvSCdCZAPq5aE1vwJNaaK5lqpqf8i6D
RfuY), Facebook
(https://www.globenewswire.com/Tracker?data=w_7InjopQLZsI8vq_Odrj3dZQIjkpB6N6vBV
gm0Bfan6h7clgawZwywkVbPntBDeSekoyIOy-CvR18EY0mFgxd78BPL9kje8JFWOOMFdGZs=), X
(https://www.globenewswire.com/Tracker?data=zyjDS0aQocWlu7qxR55iR13DkbgTzcuBf99_
D-EHrbAhHwg-KrFETegOV9xrfbG9O9AW2eOaUnIxGJZGaHT2AQ==) and YouTube
(https://www.globenewswire.com/Tracker?data=FWK0qZ1Piix2rTD781GfT4P9ErqYqf9Jd3fh
frcXvvo0rV7HcWq1w-EWGrtuLEy5DQmUxFXo2fg6HgGryRxrV7BGN37PRiIRKIhXdfo7bHM=).
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.
|