Gross Asset Value (GAV)
In Q2 2019, the GAV increased from EUR 269.5 million to EUR 344.9 million compared to the end of Q1 2019. The increase is mainly related to a new acquisition during the quarter and the increase in cash as a result of the private placements. The Fund completed the acquisition of the Galerija Centrs Shopping Centre on 13 June 2019 and thus has deployed most of the new capital raised in April and May 2019. The value of investment properties increased to EUR 336.3 million after the acquisition of the Galerija Centrs Shopping Centre and mid-year valuations.
Net Asset Value (NAV)
In Q2 2019, the Fund NAV increased from EUR 109.3 million to EUR 131.1 million compared to the end of Q1 2019. The Fund NAV was positively affected by the Fund’s operational performance over the quarter and capital raisings in the amount of EUR 24.5 million (net equity) through private placements in April and May. However, this was offset by a EUR 2.5 million cash distribution to unitholders (EUR 0.025 per unit) and a negative cash flow hedge reserve movement during the quarter.
Net Rental Income and Net Profit
In Q2 2019, the Fund earned a net profit of EUR 0.1 million (EUR 2.6 million during Q2 2018). The decrease in the net result was mainly attributable to investment property revaluation losses. The fair values of investment properties in the Fund’s portfolio dropped slightly due to downward adjustments in the EU and Baltic consumer price index levels for the coming years, which are used in valuation calculations. During the quarter, the Group recognised revaluation losses of EUR 2.4 million. In Q2 2019, the Fund recorded a EUR 4.3 million net rental income (EUR 3.6 million in Q2 2018). Growth in net rental income was positively affected by new property acquisitions at the end of 2018 and the beginning of 2019 (LNK Centre office building, Duetto II office building, and Galerija Centrs shopping centre).
Cash Distributions (dividends)
On 2 August 2019, the Fund declared a EUR 2.62 million quarterly cash distribution to investors, which represents a EUR 0.026 distribution per unit for the Q2 2019 results (EUR 2.45 million or EUR 0.025 per unit for Q1 2019).
Key figures
| Euro ‘000 | Q2 2019 | Q2 2018 | Change (%) |
| Net rental income | 4,256 | 3,626 | 17.4% |
| Valuation gains (losses) on investment properties | (2,439) | 480 | (608.1%) |
| Operating profit | 1,000 | 3,524 | (71.6%) |
| Net financing costs | (1,076) | (714) | 50.7% |
| Profit (loss) before tax | (76) | 2,810 | (102.7%) |
| Net profit for the period | 144 | 2,576 | (94.4%) |
| Weighted average number of units outstanding | 94,949,766 | 79,157,094 | 20.0% |
| Earnings per unit (EUR) | – | 0.03 | (100.0%) |
| Euro ‘000 | 30.06.2019 | 31.12.2018 | Change (%) |
| Investment property in use | 336,310 | 245,160 | 37.2% |
| Gross asset value (GAV) | 344,886 | 260,878 | 32.2% |
| Interest bearing loans | 197,001 | 140,507 | 40.2% |
| Total liabilities | 213,804 | 151,073 | 41.5% |
| Net asset value (NAV) | 131,082 | 109,805 | 19.4% |
| Number of units outstanding | 97,964,044 | 78,496,8311 | 24.8% |
| Net asset value (NAV) per unit (EUR) | 1.3381 | 1.3988 | (4.3%) |
| Loan-to-Value ratio (LTV) | 58.6% | 57.3% | – |
| Average effective interest rate | 2.6% | 2.4% | – |
- The number of units excludes 255,969 units acquired by the Fund and cancelled in February 2019 as part of the unit buy-back program.
Investment properties PERFORMANCE in Q2 2019
During Q2 2019, the average actual occupancy of the portfolio was 95.4% (Q1 2019: 96.6%). When all rental guarantees are considered, the effective occupancy rate is 96.7% (Q1 2019: 97.3%). The average direct property yield during Q2 2019 was 6.8% (Q1 2019: 6.7%). The net initial yield for the whole portfolio for Q2 2019 was 6.5% (Q1 2019: 6.3%).
Overview of the Fund’s investment properties as of 30.06.2019
| Property name | Sector | Market value1 Euro ‘000 |
NLA | Direct property yield2 | Net initial yield3 | Occupancy rate for Q2 2019 |
| Vilnius, Lithuania | ||||||
| Duetto I | Office | 16,020 | 8,498 | 7.7% | 7.1% | 98.7%4 |
| Duetto II | Office | 17,900 | 8,636 | 7.1% | 7.2% | 100.0%4 |
| Europa SC | Retail | 40,360 | 16,856 | 6.8% | 6.1% | 95.1% |
| Domus Pro Retail Park | Retail | 16,510 | 11,247 | 7.4% | 6.7% | 98.1% |
| Domus Pro Office | Office | 7,530 | 4,831 | 8.7% | 7.5% | 100.0% |
| Meraki Land | 1,700 | – | – | – | – | |
| Total Vilnius | 100,020 | 50,068 | 7.2% | 6.7% | 97.7% | |
| Riga, Latvia | ||||||
| Upmalas Biroji BC | Office | 25,220 | 10,458 | 7.2% | 6.7% | 100.0% |
| Vainodes I | Office | 21,490 | 8,052 | 6.9% | 6.9% | 100.0% |
| LNK Centre | Office | 16,830 | 7,453 | 6.3% | 6.2% | 100.0% |
| Sky SC | Retail | 5,370 | 3,254 | 8.4% | 7.8% | 99.4% |
| Galerija Centrs | Retail | 75,840 | 23,862 | 6.9% | 6.8% | 95.8% |
| Total Riga | 144,750 | 53,079 | 6.9% | 6.7% | 99.3% | |
| Tallinn, Estonia | ||||||
| Postimaja & CC Plaza | Retail | 32,140 | 9,145 | 4.2% | 4.5% | 90.6% |
| Postimaja & CC Plaza | Leisure | 14,980 | 8,664 | 8.5% | 6.9% | 100.0% |
| G4S Headquarters | Office | 17,130 | 9,179 | 6.4% | 5.8% | 87.0% |
| Lincona | Office | 17,480 | 10,871 | 8.1% | 7.4% | 98.3% |
| Pirita SC | Retail | 9,810 | 5,508 | 6.6%5 | 8.1%5 | 91.1% |
| Total Tallinn | 91,540 | 43,367 | 6.1% | 6.0% | 93.7% | |
| Total portfolio | 336,310 | 146,514 | 6.8% | 6.5% | 96.7% |
- Based on the latest valuation as at 30 June 2018.
- Direct property yield (DPY) is calculated by dividing NOI by the acquisition value and subsequent capital expenditure of the property.
- The net initial yield (NIY) is calculated by dividing NOI by the market value of the property.
- Duetto II effective occupancy rate is 100% due to a rental guarantee. The rental guarantee provided to Duetto I expired in March.
- In Q2 2019, the actual annualized average direct property yield of the Pirita SC was negative at 1.4%. The actual net initial yield during Q2 2019 was negative at 1.8%. Actual yields were negative due to a partial write-off of a rental guarantee accrual (EUR 153 thousand) and impairment of trade receivables (EUR 91 thousand) during Q2 2019. The impairment and write-off were excluded from yield calculations as they are considered a one-off event.
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
| Euro ‘000 | 01.04.2019-30.06.2019 | 01.04.2018-30.06.2018 | 01.01.2019-30.06.2019 | 01.01.2018-30.06.2018 |
| Rental income | 4,646 | 3,958 | 8,797 | 7,564 |
| Service charge income | 889 | 608 | 1,652 | 1,193 |
| Cost of rental activities | (1,279) | (940) | (2,277) | (1,722) |
| Net rental income | 4,256 | 3,626 | 8,172 | 7,035 |
| Administrative expenses | (817) | (621) | (1,526) | (1,261) |
| Other operating income | – | 39 | 6 | 45 |
| Valuation gains (losses) on investment properties | (2,439) | 480 | (2,439) | 480 |
| Operating profit | 1,000 | 3,524 | 4,213 | 6,299 |
| Financial income | 1 | 2 | 3 | 4 |
| Financial expenses | (1,077) | (716) | (1,976) | (1,205) |
| Net financing costs | (1,076) | (714) | (1,973) | (1,201) |
| Profit (loss) before tax | (76) | 2,810 | 2,240 | 5,098 |
| Income tax charge | 220 | (234) | 77 | (838) |
| Profit for the period | 144 | 2,576 | 2,317 | 4,260 |
| Other comprehensive income that is or may be reclassified to profit or loss in subsequent periods | ||||
| Net gains (losses) on cash flow hedges | (536) | (315) | (1,092) | (630) |
| Recognition of initial interest rate cap costs | – | (33) | – | (33) |
| Income tax relating to net gains (losses) on cash flow hedges | 39 | 34 | 75 | 79 |
| Other comprehensive income (expense), net of tax, that is or may be reclassified to profit or loss in subsequent periods | (497) | (314) | (1,017) | (584) |
| Total comprehensive income (expense) for the period, net of tax | (353) | 2,262 | 1,300 | 3,676 |
| Basic and diluted earnings per unit (Euro) | 0.00 | 0.03 | 0.03 | 0.05 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| Euro ‘000 | 30.06.2019 | 31.12.2018 |
| Non-current assets | ||
| Investment properties | 336,310 | 245,160 |
| Derivative financial instruments | 33 | 9 |
| Other non-current assets | 95 | 596 |
| Total non-current assets | 336,438 | 245,765 |
| Current assets | ||
| Trade and other receivables | 2,301 | 2,229 |
| Prepayments | 339 | 154 |
| Other current assets | 856 | 505 |
| Cash and cash equivalents | 4,952 | 12,225 |
| Total current assets | 8,448 | 15,113 |
| Total assets | 344,886 | 260,878 |
| Equity | ||
| Paid in capital | 117,883 | 93,673 |
| Own units | – | (335) |
| Cash flow hedge reserve | (2,022) | (1,005) |
| Retained earnings | 15,221 | 17,472 |
| Total equity | 131,082 | 109,805 |
| Non-current liabilities | ||
| Interest bearing loans and borrowings | 196,613 | 140,401 |
| Deferred tax liabilities | 5,674 | 5,844 |
| Derivative financial instruments | 2,186 | 1,069 |
| Other non-current liabilities | 1,271 | 905 |
| Total non-current liabilities | 205,744 | 148,219 |
| Current liabilities | ||
| Interest bearing loans and borrowings | 388 | 106 |
| Trade and other payables | 6,710 | 2,397 |
| Income tax payable | 1 | – |
| Other current liabilities | 961 | 351 |
| Total current liabilities | 8,060 | 2,854 |
| Total liabilities | 213,804 | 151,073 |
| Total equity and liabilities | 344,886 | 260,878 |
For additional information please contact:
Tarmo Karotam
Baltic Horizon Fund manager
E-mail tarmo.karotam@nh-cap.com
www.baltichorizon.com
Baltic Horizon Fund is a registered contractual public closed-end real estate fund managed by Alternative Investment Fund Manager license holder Northern Horizon Capital AS.
Distribution: Nasdaq Tallinn, Nasdaq Stockholm, GlobeNewswire, www.baltichorizon.com
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 14:00 EET on 16 August 2019.
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