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