The decrease in euro interest rates is quietly increasing transaction activity on the Baltic real estate market and has a positive effect on the financial results of EfTEN Real Estate Fund AS. Thus, in the third quarter of 2024, the fund’s consolidated interest expense decreased by more than 60 thousand euros compared to the previous quarter. From the transactions perspective, the third quarter was the most active in recent years – the Fund’s subsidiary EfTEN Tähesaju tee OÜ sold the Tähesaju Hortes property, and the fund established two new 100% subsidiaries to acquire the logistics centers Paemurru and Härgmäe respectively in Tallinn and Harjumaa. The acquisition cost of the two new properties will be almost 15 million euros upon their final completion. In the third quarter of this year, the construction work was completed and the ERM elderly care home was also opened next to Tartu.
A further decline in interest rates is expected. This has already had a positive effect on listed share and bond prices of real estate sector companies on the Scandinavian stock exchange. In the wake of these developments, banks with Nordic owners operating in the Baltics are again looking more positively at financing the real estate sector. According to the fund manager, this creates a good basis for overcoming the decline of the past few years in the Baltic commercial real estate market. However, since local major real estate investors lack capital at the moment and there is no sign of foreign investors entering the local market, the recovery will not be quick. The market still remains a so-called buyer’s market, where it is possible to acquire high-quality property at a good price level. For this reason, the fund announced its intention to launch a new share issue in the fall of 2024, with the aim of raising additional equity of up to a maximum of EUR 30 million. At the extraordinary general meeting held on 16 October 2024, the shareholders granted the supervisory board and management the necessary authorizations to organize the share issue.
Financial overview
The consolidated sales revenue of EfTEN Real Estate Fund AS for the third quarter of 2024 was 8.006 million euros (2023 third quarter: 7.965 million euros). The consolidated sales revenue of EfTEN Real Estate Fund AS for the 9 months of 2024 was 23.924 million euros (2023: 23.714 million euros). The Group’s net rental income in the 9 months of 2024 was a total of 22.203 million euros (2023: 22.201 million euros). The group’s net profit in the same period was 10.104 million euros (2023: 6.880 million euros).
The consolidated net rental income margin was 93% (2023: 94%) in the 9 months of 2024, so costs directly related to property management (including land tax, insurance, maintenance and improvement costs) and distribution costs constituted 7% (2023: 6%) of sales revenue.
The volume of the Group’s assets as of 30.09.2024 was 377,723 million euros (31.12.2023: 380.944 million euros), of what the fair value of investment properties made up 96% (31.12.2023: 94%).
Investment portfolio
As of the end of September 2024, the Group owns 34 (31 December 2023: 35) commercial investment properties, with a fair value of EUR 358.577 million as of the balance sheet date (31 December 2023: EUR 357.916 million) and an acquisition cost of EUR 356.156 million (31 December 2023: EUR 354.408 million). In addition, in September 2024, the Group entered into purchase agreements for the Härgmäe and Paemurru logistics centers, making advance payments under the agreements totaling EUR 2.173 million. After the balance sheet date, in October 2024, the Group’s subsidiary signed a real rights contract for the Härgmäe property, paying an additional EUR 8.3 million for the investment property on top of the previously made advance payment (a total of EUR 8.8 million).
In September 2024, the Group sold the Tähesaju Hortese property for EUR 4.675 million.
In addition to the investment properties held by the subsidiaries of the fund, the Group also holds a 50% stake in the joint venture that owns the Palace Hotel in Tallinn, with a fair value of EUR 8.543 million as of 30 September 2024 (31 December 2023: EUR 9.0 million).
In the 9 months of 2024, the group earned a total of 23.043 million euros in rental income, which is 1% more than at the same time in 2023. Rental income increased the most in shopping centers. In the office segment, rental income decreased mainly due to the expiration of the lease agreement with the anchor tenant in the Menulio 11 office building in Vilnius.
As of 30.09.2024, the vacancy of investment properties belonging to the Group was 3.2% (31.12.2023: 2.6%). The largest vacancy is in the office segment (13.1%), where it takes longer than before to fill vacant rental premises.
Financing
During the 9 months of 2024, the Fund’s subsidiaries EfTEN Autokeskus OÜ and EfTEN Jurkalne SIA extended their loan agreements. In the next 12 months, the loan agreements of two subsidiaries of the Group will expire, the balance of which as of 30.09.2024 is 8,025 thousand euros in total. The LTV of the expiring loan agreements is 28.3% and 46.5%, and both investment property have a stable rental cash flow, therefore, according to the management of the Group, there are no obstacles to the extension of the loan agreements.
The weighted average interest rate of the Group’s loan agreements is 5.35% as of 30.09.2024 (31.12.2023: 5.91%) and the LTV (Loan to Value) is 41% (31.12.2023: 42%). All loan agreements of the Fund’s subsidiaries are linked to a floating interest rate.
After the balance sheet date, in October 2024, the Group entered into two loan agreements related to the purchase of the Härgmäe logistics center, with a total amount of EUR 7.3 million. This includes a loan agreement for EUR 2.8 million with an interest rate of 2.5% + 6-month EURIBOR, maturing on 31 December 2024, and a loan agreement for EUR 4.5 million with an interest rate of 1.8% + 6-month EURIBOR, maturing on 27 September 2029.
Information on shares
The net value of the share of EfTEN Real Estate Fund AS as of 30.09.2024 was 20.15 euros (31.12.2023: 20.21 euros). The net value of the share of EfTEN Real Estate Fund AS decreased by 0.3% in the 9 months of 2024. In April 2024, the Fund paid dividends in the total amount of 10.82 million euros. Without profit distribution, the net value of EfTEN Real Estate AS shares would have increased by 4.6% during the nine months of the year.
As of 30.09.2024, the Fund has 10,819,796 shares.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| III quarter | 9 months | |||
| 2024 | 2023 | 2024 | 2023 | |
| € thousands | ||||
| Revenue | 8,006 | 7,965 | 23,924 | 23,714 |
| Cost of services sold | -473 | -363 | -1,232 | -1,120 |
| Gross profit | 7,533 | 7,602 | 22,692 | 22,594 |
| Marketing costs | -111 | -105 | -489 | -393 |
| General and administrative expenses | -860 | -841 | -2,679 | -2,568 |
| Profit / loss from the change in the fair value of investment property | -415 | 0 | -1,869 | -6,182 |
| Other operating income and expense | -41 | 10 | 45 | 23 |
| Operating profit | 6,106 | 6,666 | 17,700 | 13,474 |
| Profit / loss from joint ventures | 83 | 84 | -171 | -25 |
| Interest income | 51 | 77 | 216 | 97 |
| Other finance income and expense | -2,171 | -2,156 | -6,644 | -5,693 |
| Profit before income tax | 4,069 | 4,671 | 11,101 | 7,853 |
| Income tax expense | -215 | -236 | -997 | -973 |
| Net profit for the reporting period | 3,854 | 4,435 | 10,104 | 6,880 |
| Total consolidated profit for the reporting period | 3,854 | 4,435 | 10,104 | 6,880 |
| Earnings per share | ||||
| – basic | 0.36 | 0.41 | 0.93 | 0.64 |
| – diluted | 0.36 | 0.41 | 0.93 | 0.64 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| 30.09.2024 | 31.12.2023 | |
| € thousands | ||
| ASSETS | ||
| Cash and cash equivalents | 10,637 | 14,712 |
| Current deposits | 2,142 | 3,400 |
| Receivables and accrued income | 1,603 | 2,360 |
| Prepaid expenses | 200 | 106 |
| Total current assets | 14,582 | 20,578 |
| Non-current receivables | 355 | 214 |
| Shares in joint ventures | 1,907 | 2,078 |
| Investment property | 360,750 | 357,916 |
| Property, plant, and equipment | 129 | 158 |
| Total non-current assets | 363,141 | 360,366 |
| TOTAL ASSETS | 377,723 | 380,944 |
| LIABILITIES AND EQUITY | ||
| Borrowings | 13,809 | 16,907 |
| Payables and prepayments | 3,110 | 3,417 |
| Total current liabilities | 16,919 | 20,324 |
| Borrowings | 132,094 | 130,849 |
| Other non-current liabilities | 1,832 | 1,790 |
| Deferred income tax liability | 8,896 | 9,283 |
| Total non-current liabilities | 142,822 | 141,922 |
| Total liabilities | 159,741 | 162,246 |
| Share capital | 108,198 | 108,198 |
| Share premium | 84,721 | 84,721 |
| Statutory reserve capital | 2,799 | 2,749 |
| Retained earnings | 22,264 | 23,030 |
| TOTAL EQUITY | 217,982 | 218,698 |
| TOTAL LIABILITIES AND EQUITY | 377,723 | 380,944 |
Marilin Hein
CFO
Phone +372 6559 515
E-mail: marilin.hein@eften.ee
