Market announcement

Title

EfTEN Real Estate Fund III AS unaudited results for 3rd quarter and 9 months 2022

Message

Comments from Fund Manager Viljar Arakas

The  three quarters  of this  year has  been financially  the best period in the
fund's history. Rental income increased by 13%. Both, acquisition of new objects
but  equally importantly increasing rental income  from existing objects by 8%,
contributed to this. It indicates that despite increasing energy prices, we have
been  able  to  pass  on  rent  increase  to  our  tenants  as well as to reduce
vacancies.

The  vacancy level was 0.5% at the end  of the 3rd quarter, i.e. essentially all
commercial premises of the fund are covered by lease agreements.

High  energy  prices  present  challenges,  but  so  far we have not encountered
impossible  problems. The  fund manager,  in cooperation  with the tenants, does
everything possible to reduce energy consumption in the buildings.

From  the fund's investors perspective  it is important that  free cash flow for
dividend  has increased by 22% to 4,623 mio EUR (73 euro cents per share) during
the  first three quarters of  the year. The fund  has a low financial leverage -
41% LTV (the total value of loans to the total value of assets). As a result, we
plan  to increase the leverage level of  each property to 50% during the regular
refinancing  operations and pay out the  additional cash flow to shareholders as
dividends.

The  rapidly growing euribor leads to higher  financial costs, but since we have
always  amortised on our  loans (as a  rule, 27% of the  monthly rental income),
higher  interest rates do not pose any threat to the fund's business activities.
In addition, the ability to pass on increase in rental prices in recent quarters
gives  us additional assurance that  the rising interest costs  can be (at least
partially) compensated by higher rental income.


Financial overview

The first 9 months of 2022 turned out to be succesful for EfTEN Real Estate Fund
III  AS. The fund's revenue increased to EUR 10,600 million, i.e 12.6%, compared
to the last year's first nine months.

In  the first  nine months  of the  year the  fund purchased  two new investment
properties  - immovables  for Valkla  and Ermi  care homes  which are planned to
accommodate  up to 370 customers when finished. As of September 30, 2022 a total
of  EUR 2,389 million  has been  spent to  purchase the  care homes  and to make
initial investments.

In  June 2022, the fund's subsidiaries EfTEN Laagri OÜ (Laagri Selver) and EfTEN
Seljaku  OÜ (Laagri Hortes) extended  their bank loans for  the next five years.
When  EfTEN Laagri OÜ intrest margin stayed the same when extending the contract
(1,4%),  then EfTEN Seljaku OÜ interest  margin increased from 1.55% to 2.0%. In
the  following 12 months,  the fund's  three loans  that have mortgage on Saules
Miestas  shopping centre,  Evolution office  building and  Piepilsetas logistics
centre will meet their maturity dates. All investment properties that are set as
collateral  have strong rental cash flow and  LTV is between 30% and 40%, due to
which  the management does not see risk  related to extending the loan contracts
when the maturity date arrives.

As  of September 30, 2022, the fund has  EUR 3,5 million uninvested capital that
is planned to use for development of purchased care home land plots.

The  consolidated revenue of EfTEN Real Estate Fund III AS for the third quarter
of   2022 was   EUR  3,612 million  (2021  third  quarter:  EUR  3,458 million),
increasing by 4.5% during the year.

The  consolidated revenue of  EfTEN Real Estate  Fund III AS  for the first nine
months  of  2022 was  EUR  10,600 million  (2021  first  nine months: EUR 9,413
million),  increasing by 12.6% compared to last year (EUR 1,187 million). In the
first nine months of 2022, the Group earned rental revenue of EUR 9,995 million.
Rental income calculated in comparative terms was EUR 9,331 million in the first
nine  months of  2022, which is  9% (EUR 752 thousand)  more than in 2021 at the
same time.

The  Group's net rental income of the  first nine months of 2022 was EUR 10,135
million  (2021: EUR 9,076 million), increasing  by 11.7%. The Group's net profit
for the same period was EUR 10,209 million (2021: EUR 7,744 million).

In  the first nine months of 2022, the consolidated net rental income margin was
96% (2021:  same), thus, the expenses directly related to the management of real
estate  (incl.  land  tax,  insurance,  maintenance,  and improvement costs) and
marketing expenses accounted for 4% (2021: same) of revenue.

As  of  September  30, 2022, the  volume  of  the  Group's  total assets was EUR
180,125 million (31.12.2021: EUR 176,401

As  of September, 2022, the Group had 18 (31.12.2021: 16) commercial real estate
investments  with a  fair value  as of  balance sheet  date in the amount of EUR
168,830 million  (31.12.2021: EUR  161,961 million) and  acquisiton cost  of EUR
150,800 million (31.12.2021: EUR 147,633 million).

In  April, the fund's subsidiary EfTEN Valkla OÜ acquired real estate located in
Valklaranna  tee 36, Valkla.  The fund  plans to  remodel the building from care
home  to general  care home  that could  accommodate up  to 250 customers in the
future.  Renovation work is performed in stages.  The purchase price of the real
estate  plot was  EUR 2,005 thousand  and in  addition, the fund's subsidiary is
required  to carry out investments on the amount of EUR 2,000 thousand. Purchase
of the real estate plot and investments are financed by the fund's own assets.

In  April, the fund's subsidiary EfTEN  Ermi OÜ acquired building rights located
in  Ermi tn 13, Tila  village, Tartu parish  in Tartu county.  The fund plans to
develop  a care home for minimum of 120 customers on the land plot used based on
the  building rights. The  building rights' maturity  date is 50 years, which is
possible  to  extend  up  to  99 years  in  agreement  with the landowner. After
developing  a care home  in the land  plot, it will  be leased to Südamekodud AS
based  on a longterm lease  contract. The purchase price  of the building rights
was  EUR  233 thousand-  Purchase  of  the  building  rights and investments are
financed by the fund's own assets.

In  the following 12 months, the Group's  three subsidiaries' - Evolution office
building, Saules Miestas shopping centre and Piepilsetas logistics centre - loan
contracts  will end, the  balance of the  loans as of  30 September, 2022 is EUR
20,160 thousand.  The LTV of  maturing loan contracts  is 30%-40% and investment
properties  have  stabile  strong  rental  cash  flow,  due to which the Group's
management does not see risk related to extending the contracts.

The  weighted average interest rate of the Group's loan agreements (incl. taking
into account interest rate swap agreements) as of at the end of September is

2.9% (31.12.2021: same) and LTV (Loan to Value) is 41% (31.12.2021: 44%). All of
the loan agreements of the fund's subsidiaries are linked to a floating interest
rate. In order to hedge the risk of an increase in the interest rate of one loan
agreement,  where  Euribor  is  fixed  at  0.35% rate.  The  interest  rate swap
agreement  expires in 2023 and  it's fair value  as of September 30, 2022 is EUR
79 thousand.

As of September 30, 2022, the net asset value per share (EPRA NDV) of EfTEN Real
Estate  Fund III AS  was EUR 20.32 (31.12.2021:  EUR 19.11). The net asset value
per  share of EfTEN Real Estate Fund III  AS increased by 6.3% in nine months of
2022.

CONSOLIDATED STATEMEMT OF COMPREHENSIVE INCOME

                                                3rd             9 months
                                                quarter
                                               --------------------------------
 EUR thousands                                    2022      2021  2022     2021
-------------------------------------------------------------------------------
 Revenue                                        3,612     3,458 10,600   9,413
-------------------------------------------------------------------------------
 Cost of sales                                  -80       -54   -211     -193
-------------------------------------------------------------------------------
 Gross profit                                   3,532     3,404 10,389   9,220
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 Marketing costs                                -63       -54   -254     -144
-------------------------------------------------------------------------------
 General and administrative expenses            -488      -426  -1,391   -1,302
-------------------------------------------------------------------------------
 Gain / loss from revaluation of investment     -1        0     3,701    2,020
 properties
-------------------------------------------------------------------------------
 Other operating income and expense             5         12    48       18
-------------------------------------------------------------------------------
 Operating profit                               2,985     2,936 12,493   9,812
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 Other finance income and expense               -376      -419  -1,098   -1,258
-------------------------------------------------------------------------------
 Profit before income tax                       2,609     2,517 11,395   8,554
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 Income tax expense                             -282      -243  -1,186   -810
-------------------------------------------------------------------------------
 Net profit for the financial year              2,327     2,274 10,209   7,744
-------------------------------------------------------------------------------
 Earnings per share
-------------------------------------------------------------------------------
 - basic                                        1.17      0.45  2.01     1.69
-------------------------------------------------------------------------------
 - diluted                                      1.17      0.45  2.01     1.69
-------------------------------------------------------------------------------

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                   30.09.2022   31.12.2021
-----------------------------------------------------------
  EUR thousands
-----------------------------------------------------------
  ASSETS
-----------------------------------------------------------
  Cash and cash equivalents        9,623        13,074
-----------------------------------------------------------
  Receivables and accrued income   1,496        876
-----------------------------------------------------------
  Prepaid expenses                 44           314
-----------------------------------------------------------
  Inventory                        0            29
                                 --------------
  Total current assets             11,163       14,293
-----------------------------------------------------------
  Long-term receivables            2            4
-----------------------------------------------------------
  Investment property              168,830      161,961
-----------------------------------------------------------
  Property. plant and equipment    128          140
-----------------------------------------------------------
  Intangible assets                2            3
-----------------------------------------------------------
  Total non-current assets         168,962      162,108
-----------------------------------------------------------
  TOTAL ASSETS                     180,125      176,401
-----------------------------------------------------------

-----------------------------------------------------------
  LIABILITIES AND EQUITY
-----------------------------------------------------------
  Borrowings                       22,280       7,645
-----------------------------------------------------------
  Derivative instruments           0            121
-----------------------------------------------------------
  Payables and prepayments         949          1,349
-----------------------------------------------------------
  Total current liabilities        23,229       9,115
-----------------------------------------------------------
  Borrowings                       46,117       63,440
-----------------------------------------------------------
  Other long-term debt             1,007        987
-----------------------------------------------------------
  Deferred income tax liability    6,707        5,945
-----------------------------------------------------------
  Total non-current liabilities    53,831       70,372
-----------------------------------------------------------
  Total liabilities                77,060       79,487
-----------------------------------------------------------
  Share capital                    50,725       50,725
-----------------------------------------------------------
  Share premium                    16,288       16,288
-----------------------------------------------------------
  Statutory reserve capital        2,149        1,489
-----------------------------------------------------------
  Retained earnings                33,903       28,412
-----------------------------------------------------------
  Total equity                     103,065      96,914
-----------------------------------------------------------
  TOTAL LIABILITIES AND EQUITY     180,125      176,401
-----------------------------------------------------------




Marilin Hein

CFO
Phone +372 6559 515
E-mail: [email protected] (mailto:[email protected])