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Repeat: Baltic Horizon Fund Consolidated Audited Results for 2020

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Baltic Horizon Fund / Northern Horizon Capital
·12-min read
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This repeat announcement includes a link to Baltic Horizon Fund 2020 financial results in European Single Electronic Format (ESEF) applying the technical requirements applicable to the issuers on regulated market is European Union. The original attachment included one incorrect XBRL tag. Final ESEF report of Baltic Horizon Fund has been attached to this announcement.

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Management Board of Northern Horizon Capital AS has approved the audited financial results of Baltic Horizon Fund (the Fund) for the year 2020. The financial results remained unchanged compared to the preliminary disclosure on 15 February 2021.

Distributions to unitholders for 2020 Fund results
In total, the Fund declared a cash distribution of EUR 7,829 thousand from the operating results of 2020 (EUR 1,701 thousand from Q1 2020, EUR 1,701 thousand from Q2 2020, EUR 3,111 thousand from Q3 2020 and EUR 1,316 thousand from Q4 2020). Dividends for the operating results of 2020 correspond to a gross yield of 5.8% based on the closing price on the Nasdaq Tallinn Stock Exchange at 31 December 2020. The reduced cash distributions due to uncertain environment increased the Fund’s unpaid dividend reserve to EUR 4,4 million by the end of 2020.

Net profit and net rental income
The Group recorded a net loss of EUR 13.5 million for 2020 against a net profit of EUR 8.8 million for 2019. The net result was significantly impacted by the negative valuation result of EUR 25.2 million recognised in June and December 2020. The negative impact of valuation losses on investment properties was partially offset by an increase in net rental income, other operating income and a slight decrease in administrative expenses. Excluding the valuation impact on the net result, net profit for 2020 would have amounted to EUR 11.7 million (2019: EUR 10.9 million). Earnings per unit for 2020 were negative at EUR 0.12 (2019: positive EUR 0.09). Earnings per unit excluding valuation losses on investment properties would have amounted to EUR 0.10 (2019: EUR 0.11).

In 2020, the Group earned net rental income of EUR 19.9 million exceeding the previous year’s net rental income by EUR 0.7 million or 3.7% (2019: 19.2 million). The increase was achieved through new acquisitions that were made following the capital raisings in 2019. The acquisition of Galerija Centrs and North Star had a significant effect on the Group’s net rental income growth in 2020 as compared to 2019, albeit rental income growth in Q2-Q4 2020 was slower due to the relief measures granted to tenants during the COVID-19 pandemic. The addition of Galerija Centrs added EUR 3.0 million to the net rental income during 2020, while North Star added EUR 1.4 million.

Portfolio properties in the office segment contributed 55.8% (2019: 50.8%) of net rental income in 2020 followed by the retail segment with 40.1% (2019: 43.8%) and the leisure segment with 4.1% (2019: 5.4%).

During 2020, investment properties in Latvia and Lithuania contributed 38.3% (2019: 37.2%) and 36.4% (2019: 35.0%) of net rental income respectively, while investment properties in Estonia contributed 25.3% (2019: 27.8%).

Gross Asset Value (GAV)
By the end of December 2020, the GAV decreased to EUR 355.6 million (31 December 2019: EUR 371.7 million) which was a drop of 4.3% over 2020. The decrease is mainly related to the negative property revaluation of EUR 25.2 million. The Fund aims to carry on with the construction of the Meraki office building throughout 2021. The Management Company will continue to actively monitor the economic impact of the pandemic and ensure sufficient liquidity levels during the construction period.

Net Asset Value (NAV)
By the end of December 2020, the Fund’s net asset value (NAV) decreased to EUR 136.3 million (31 December 2019: EUR 152.5 million) as a result of the negative portfolio revaluation which was impacted by the high market uncertainty surrounding the COVID-19 pandemic. Compared to the year-end 2019 NAV, the Fund’s NAV decreased by 10.6%. Positive operational performance over the period was offset by EUR 25.2 million valuation losses, EUR 9.7 million dividend distributions to the unitholders and a negative cash flow hedge reserve movement of EUR 0.1 million. At 31 December 2020, IFRS NAV per unit stood at EUR 1.1395 (31 December 2019: EUR 1.3451), while EPRA net tangible assets and EPRA net reinstatement value were EUR 1.2219 per unit (31 December 2019: EUR 1.4333). EPRA net disposal value was EUR 1.1435 per unit (31 December 2019: EUR 1.3400).

Investment properties
The Baltic Horizon Fund portfolio consists of 15 cash flow investment properties in the Baltic capitals and an investment property under construction on the Meraki land plot. At the end of 2020, the fair value of the Fund’s portfolio was EUR 340.0 million (31 December 2019: EUR 358.9 million) and incorporated a total net leasable area of 153,345 sq. m.

The valuation losses on the property portfolio came to EUR 25.2 million during 2020 (2019: EUR 2.1 million). Valuations were negatively affected primarily due to downward adjustments to valuation assumptions resulting from the uncertainty associated with the COVID-19 pandemic. Due to global market uncertainty caused by the virus, valuations were reported on the basis of “material valuation uncertainty”. During 2020, the Group invested EUR 2.1 million in the existing property portfolio and an additional EUR 4.2 million in the Meraki development project.

Interest bearing loans and bonds
Interest bearing loans and bonds (excluding lease liabilities) remained at a similar level of EUR 205.6 million compared to year-end 2019 figures (31 December 2019: EUR 205.8 million). Outstanding bank loans decreased slightly due to regular bank loan amortisation. Annual loan amortisation accounts for 0.2% of total debt outstanding.

Cash flow
Cash inflow from core operating activities for 2020 amounted to EUR 16.1 million (2019: cash inflow of EUR 16.4 million). Cash outflow from investing activities was EUR 4.3 million (2019: cash outflow of EUR 78.2 million) due to subsequent capital expenditure on existing portfolio properties and investments in the Meraki development project. Cash outflow from financing activities was EUR 8.3 million (2019: cash inflow of EUR 59.4 million). During 2020, the Fund made four cash distributions of EUR 9.7 million and paid regular interest on bank loans and bonds. At the end of December 2020, the Fund’s consolidated cash and cash equivalents amounted to EUR 13.3 million (31 December 2019: EUR 9.8 million) which demonstrates sufficient liquidity and financial flexibility.

Key earnings figures

EUR ‘000

2020

2019

Change (%)

Net rental income

19,934

19,219

3.7%

Administrative expenses

(2,918)

(3,251)

(10.2%)

Other operating income

204

26

684.6%

Valuation losses on investment properties

(25,245)

(2,064)

1,123.1%

Operating (loss) profit

(8,025)

13,930

(157.6%)

Net financing costs

(5,521)

(4,713)

17.1%

(Loss) profit before tax

(13,546)

9,217

(247.0%)

Income tax

5

(426)

(101.2%)

Net (loss) profit for the period

(13,541)

8,791

(254.0%)

Weighted average number of units outstanding (units)

114,568,636

96,718,348

18.5%

Earnings per unit (EUR)

(0.12)

0.09

(233.3%)

Key financial position figures

EUR ‘000

31.12.2020

31.12.2019

Change (%)

Investment properties in use

334,518

356,575

(6.2%)

Investment property under construction

5,474

2,367

131.3%

Gross asset value (GAV)

355,602

371,734

(4.3%)

Interest bearing loans and bonds

205,604

205,827

(0.1%)

Total liabilities

219,281

219,216

0.0%

IFRS Net asset value (IFRS NAV)

136,321

152,518

(10.6%)

Number of units outstanding (units)

119,635,429

113,387,525

5.5%

IFRS Net asset value (IFRS NAV) per unit (EUR)

1.1395

1.3451

(15.3%)

Loan-to-Value ratio (%)

60.5%

57.3%

-

Average effective interest rate (%)

2.6%

2.6%

-

During 2020, the average actual occupancy of the portfolio was 95.8% (2019: 97.5%). Taking into account all rental guarantees, the effective occupancy rate was 95.8% (2019: 97.5%). Occupancy rate as of 31 December 2020 was 94.3% (31 December 2019: 98.3%). Occupancy rates in the retail segment decreased because of additional vacancies in Europa SC, Pirita SC and Galerija Centrs. Occupancy rates in the office segment still remain strong albeit Lithuania Tax Inspectorate vacated part of their premises in North Star resulting in a minor negative effect on the occupancy levels. Average direct property yield during 2020 was 5.8% (2019: 6.6%). The net initial yield for the whole portfolio for 2020 was 5.7% (2019: 6.3%). The decrease is mainly related to the lockdowns and additionally granted rent concessions to tenants whose operations were restricted by government regulations. The average rent rate for the whole portfolio for 2020 was EUR 12.1 per sq. m.

Overview of the Fund’s investment properties as of 31 December 2020

Property name

Sector

Fair value1
(EUR ‘000)

NLA
(sq. m)

Direct property yield2

Net initial yield3

Occupancy rate

Vilnius, Lithuania

Duetto I

Office

16,419

8,587

7.8%

7.1%

100.0%

Duetto II

Office

18,765

8,674

7.3%

7.2%

100.0%4

Europa SC

Retail

38,811

16,856

4.5%

4.2%

89.5%

Domus Pro Retail Park

Retail

16,090

11,247

7.0%

6.7%

100.0%

Domus Pro Office

Office

7,590

4,831

8.3%

7.0%

100.0%

North Star

Office

19,133

10,550

6.8%

7.2%

86.3%

Meraki Land

5,474

-

-

-

Total Vilnius

122,282

60,745

6.4%

6.1%

94.7%

Riga, Latvia

Upmalas Biroji BC

Office

23,474

10,458

7.0%

7.0%

100.0%

Vainodes I

Office

19,970

8,052

6.9%

7.0%

100.0%

LNK Centre

Office

16,060

7,453

6.4%

6.5%

100.0%

Sky SC

Retail

4,970

3,254

8.0%

8.2%

98.3%

Galerija Centrs

Retail

67,446

20,022

4.0%

4.1%

85.1%

Total Riga

131,920

49,239

5.4%

5.5%

93.8%

Tallinn, Estonia

Postimaja & CC Plaza complex

Retail

29,770

9,145

3.2%

3.5%

95.6%

Postimaja & CC Plaza complex

Leisure

14,170

8,664

6.9%

5.6%

100.0%

G4S Headquarters

Office

16,160

9,179

7.9%

7.2%

100.0%

Lincona

Office

16,110

10,865

7.7%

7.1%

90.3%

Pirita SC

Retail

9,580

5,508

5.5%

7.0%

81.9%

Total Tallinn

85,790

43,361

5.6%

5.6%

94.3%

Total portfolio

339,992

153,345

5.8%

5.7%

94.3%

  1. Based on the latest valuation as at 31 December 2020 and recognised right-of-use assets.

  2. Direct property yield (DPY) is calculated by dividing NOI by the acquisition value and subsequent capital expenditure of the property.

  3. The net initial yield (NIY) is calculated by dividing NOI by the market value of the property.

  4. Effective occupancy rate is 100% due to a rental guarantee.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

EUR ‘000

2020

2019

Rental income

21,697

20,776

Service charge income

4,990

4,525

Cost of rental activities

(6,753)

(6,082)

Net rental income

19,934

19,219

Administrative expenses

(2,918)

(3,251)

Other operating income

204

26

Valuation losses on investment properties

(25,245)

(2,064)

Operating (loss) profit

(8,025)

13,930

Financial income

3

5

Financial expenses

(5,524)

(4,718)

Net financing costs

(5,521)

(4,713)

(Loss) profit before tax

(13,546)

9,217

Income tax charge

5

(426)

(Loss) profit for the period

(13,541)

8,791

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

Net loss on cash flow hedges

(108)

(595)

Income tax relating to net loss on cash flow hedges

3

44

Other comprehensive expense, net of tax, that is or may be reclassified to profit or loss in subsequent periods

(105)

(551)

Total comprehensive (expense) income for the period, net of tax

(13,646)

8,240

Basic and diluted earnings per unit (EUR)

(0.12)

0.09

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

EUR ‘000

31.12.2020

31.12.2019

Non-current assets

Investment properties

334,518

356,575

Investment property under construction

5,474

2,367

Property, plant and equipment

2

-

Derivative financial instruments

-

73

Other non-current assets

22

54

Total non-current assets

340,016

359,069

Current assets

Trade and other receivables

1,901

1,794

Prepayments

352

301

Other current assets

-

734

Cash and cash equivalents

13,333

9,836

Total current assets

15,586

12,665

Total assets

355,602

371,734

Equity

Paid in capital

145,200

138,064

Cash flow hedge reserve

(1,661)

(1,556)

Retained earnings

(7,218)

16,010

Total equity

136,321

152,518

Non-current liabilities

Interest bearing loans and borrowings

195,670

205,718

Deferred tax liabilities

6,009

6,199

Derivative financial instruments

1,736

1,728

Other non-current liabilities

1,026

1,298

Total non-current liabilities

204,441

214,943

Current liabilities

Interest bearing loans and borrowings

10,222

414

Trade and other payables

3,640

3,171

Income tax payable

1

8

Derivative financial instruments

27

-

Other current liabilities

950

680

Total current liabilities

14,840

4,273

Total liabilities

219,281

219,216

Total equity and liabilities

355,602

371,734

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.

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 23:10 EET on 19 March 2021.

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