EfTEN Real Estate Fund III AS unaudited results for 2nd

Fund manager’s comment Viljar Arakas:

The financial results of EfTEN Real Estate Fund III AS in the first half of 2021 exceeded expectations. The fund’s EBITDA in the first six months of this year was EUR 4.89 million, which is 27% above the EBITDA of the same period in the previous year. At the beginning of the year, the alarmingly rapid spread of the coronavirus had severely restricted business, especially in Latvia and Lithuania, and the outlook was pessimistic. Significant restrictions on movement came into force in Estonia in February. Nonetheless, we were able to successfully keep all of the fund’s assets up and running – insofar as the restrictions allowed – and we have very tightly controlled the running costs.

In the first half of the year, management focused primarily on our customers and tenants. Customer-specific solutions have been found for all types of business interruptions caused by the pandemic and the fund’s occupancy rate is very well utilized. At the end of June, the vacancy rate in the fund’s real estate portfolio was only 0.7%. Despite the payment delays due to the Corona crisis (especially in the Saules Miestas shopping center), the tenants’ payment behavior is also good. In connection with payment difficulties, we have also made payment deferral agreements with tenants, mostly until the end of August, and have been able to keep the number of tenants to a minimum.

The successful share issue in the first half of the year totaling 15.13 million euros is also noteworthy. A total of 4,564 subscription orders were submitted in the issue and it was 3.6 times oversubscribed. The issuing costs were again minimal for investors and only amounted to around 0.4% of the issue volume. The external consultants were minimally involved in the organization of the issue by the management company and the offer was only made in Estonia.

In the first half of 2021, we made additional investments in the fund’s existing portfolio, mainly in the area of ​​the Saules Miestas shopping center in Šiauliai, Lithuania, where the fund’s subsidiary built a separate building for the KFC fast food restaurant. As a fund manager, we are constantly looking for ways to increase the value of our existing assets through additional developments. Another example of such investments is the construction of a solar park on the roof of the Laagri Selver shopping center.

In the first half of the year we made a new investment and acquired two industrial and warehouse buildings in Panevežys, Lithuania, for a total of 10 million euros. The non-debt entry yield of the transaction with a bank loan was 8.0% and the purchase price of the building per square meter was 500 euros below the renovation value of the house. The building is rented by ADAX UAB on the basis of a 16-year lease. The transaction was financed by Siauliu bankas for 6 million euros.

The successful first half of the fund lets us look ahead to the second half of 2021 with optimism.

Financial overview

The consolidated sales proceeds of EfTEN Real Estate Fund III AS for the second quarter of 2021 amounted to EUR 3,088 million (2nd quarter 2020: EUR 2,422 million) and increased by 27.5% (EUR 0.666 million) compared to the previous year . Of the increase in rental income, EUR 349 ​​thousand (52%) came from rental income from the acquisition of new investments (Pirita nursing home, Rutkausko office building and Ramygalos warehouse and industrial building complex). The remaining increase was mainly due to temporary rental discounts from last year’s Covid-19 discount on the existing real estate portfolio (like-for-like).

The consolidated sales proceeds of EfTEN Real Estate Fund III AS for the first half of 2021 amount to 5.955 million euros (1st half of 2020: 4.865 million euros) and are thus 22.4% (1.090 million euros) above the previous year. The rental income from the investment properties acquired in the last 12 months amounted to EUR 665 thousand (61%).

The consolidated result before revaluations of investment properties, changes in the fair value of interest rate swaps and income tax expenses amounted to EUR 3.951 million in the first half of 2021 (first half of 2020: EUR 3.132 million), an increase of 28.3% compared to the previous year.

In the first half of 2021, the fund generated a consolidated EBITDA of 4.9 million euros (first half of 2020: 3.8 million euros).

The loan agreements of the two subsidiaries of the group will fall due in the next 12 months. Most of the Group’s loans have a term of 5 years, which is refinanced when the loan agreement is terminated. Over the next 12 months, EUR 7.5 million or 10% of the entire loan portfolio will be refinanced from the Group’s loan liabilities. The average interest rate of the Group’s loan agreements (including interest swap agreements) is 2.2% (December 31, 2020: 2.3%) and LTV (Loan to Value) 46% (December 31, 2020: 50.) . %).

In the first half of 2021, the group generated a free cash flow of 2.2 million euros (6 months 2020: 1.7 million euros), of which the cash flow from investment properties over the last 12 months was 215 thousand euros.

In mid-June 2021, the group acquired a new investment property in Panevežys, Lithuania. The acquisition costs of the investment property including the transaction costs amounted to 10.011 million euros and the annual rental income amounted to 799 thousand euros.

As of the end of June 2021, the Group had 16 (December 31, 2020: 15) commercial real estate investments with a fair value of EUR 157.162 million (December 31, 2020: EUR 144.235 million) and acquisition costs of EUR 147.137 million (December 31, 2020: 136,349 Million euros) as of the balance sheet date.

In June, the fund carried out its usual valuation of investment properties, in which the value of the fund’s property portfolio increased by 1.4% (EUR 2.020 million). The change in value is mainly due to improved cash flow expectations at Saules Miestas and the Ulonu office building. The increase in value of the other properties is essentially due to a decrease in the exit yield by half or a quarter of a percentage point.

The net asset value of the shares in EfTEN Real Estate Fund III was EUR 17.60 as of June 30, 2021 (December 31, 2020: EUR 16.93). The net asset value of EfTEN Real Estate Fund III AS increased by 4.0% in the first half of 2021.

In April 2021, the annual general meeting of the fund decided to distribute a total of 2,798 thousand euros (66.3 cents per share) from the annual surplus for 2020 as a net dividend. Without the dividend distribution, the net asset value of the fund units would have increased by 6.7% in the first half of the year.

In June 2021, EfTEN Real Estate Fund III AS made a public offer of shares, which increased the fund’s share capital by 8,500 thousand euros. In the course of the share issue, payments of 15,130 thousand euros were made to the fund’s share capital.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

II quarter me half of the year
Thousand € 2021 2020 2021 2020
revenue 3,088 2,422 5,955 4,865
Cost of services sold -73 -59 -139 -147
Gross income 3,015 2,363 5,816 4,718
Marketing costs -59 -43 -90 -136
General and administrative expenses -492 -358 -876 -772
Profit / loss from the revaluation of investment properties 2,020 -3,986 2,020 -3,986
Other operating income and expenses 3 -5 6th 0
Operating profit 4,487 -2,029 6,876 -176
Other finance income and expenses -418 -345 -839 -678
Profit before income tax 4,069 -2,374 6,037 -854
Income tax expense -394 201 -567 49
Net income for the financial year1 3,675 -2.173 5,470 -805
Earnings per share
– Basic 0.83 -0.51 1.27 -0.19
– Diluted 0.83 -0.51 1.27 -0.19

C.CONSOLIDATED FINANCIAL POSITION

06/30/2021 December 31, 2020
Thousand €
FINANCIAL ASSETS
Cash and cash equivalents 9,932 5,128
Receivables and prepaid expenses 2.120 2,018
Prepaid expenses 19th 128
inventory 29 0
Total current assets 12,100 7,274
Long term claims 4th 18th
Investment property 157.162 144,235
Property, plant and equipment 150 101
Intangible assets 3 4th
Total long-term assets 157.319 144.358
TOTAL ASSETS 169.419 151,632
LIABILITIES AND EQUITY
Loans 10,695 28,781
Derivative instruments 180 246
Liabilities and prepayments 1.102 1.995
Total short-term liabilities 11,977 31,022
Loans 62.197 43,587
Other long-term debt 1,015 957
Deferred income tax liability 4,944 4,583
Total long-term liabilities 68,156 49.127
Total liabilities 80.133 80.149
Share capital 50,725 42,225
Capital reserve 16,289 9,658
Legal reserve capital 1,489 1,323
Retained earnings 20,783 18,277
Total capital 89.286 71,483
TOTAL LIABILITIES 169.419 151,632

Marilin Hein
CFO
Telephone 655 9515
Email: [email protected]

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