Fund manager's comment
Despite the challenging economic environment, EfTEN Real Estate Fund AS managed to increase both total rental income and portfolio EBITDA in 2024. The fund's portfolio was expanded by two new logistics properties in the fourth quarter and we are also planning to expand in the nursing home segment. EfTEN Real Estate Fund AS is primarily a dividend share. The fund aims to distribute 1.1 euros of dividends per share for 2024. In the spring of 2025, the fund management plans to increase the financial leverage of investment properties that that are currently significantly below the financial leverage principles set out in the fund's financing policy. While the usual leverage ratio of real estate funds in Europe is on average 50% of the market value of assets, EfTEN Real Estate Fund AS's portfolio-wide LTV (Loan-to-value) was 40% at the end of 2024.
For the first time since spring 2023, the weighted average interest rate on the fund's bank loans has fallen below 5% by the end of the year. Due to the expected further decline in EURIBOR, the interest rate on the Fund's loans will continue to decrease in 2025.
The priority for 2025 is vacancy management. As of the end of the year, the portfolio's total vacancy rate was 2.6%, with the office segment vacancy rate at 11.3%. This elevated vacancy in the office sector is primarily attributable to the ongoing renovation of the Menulio 11 office building in Vilnius, which alone accounts for 47% of the office segment's total vacancy. In line with market expectations, the Menulio 11 office building fit-out will be changed to include smaller offices which are expected to be handed over to tenants in the first half of this year.
After the balance sheet date, the tenant of the Laagri Hortes gardening center, which belongs to the fund's subsidiary and was previously undergoing reorganization, filed for bankruptcy. Harju County Court accepted the tenant's bankruptcy petition for processing, and the hearing is scheduled for March of this year. Given the strong market interest in the property, there are multiple alternatives for further action. The share of Laagri Hortes in the group's consolidated real estate investments is less than 1%, and according to the group's management, the tenant's bankruptcy proceedings are not expected to cause a significant decrease in the fair value of the property. As of December 31, 2024, the free funds available in the subsidiary's bank account cover the scheduled loan and interest payments for Laagri Hortes for the next 17 months.
In November and December 2024, the fund carried out a secondary public offering of shares, raising a total of €11.8 million in capital at €19 per share.
Financial overview
EfTEN Real Estate Fund AS' consolidated sales revenue for the fourth quarter of 2024 was 8.314 million euros, an increase of 211 thousand euros (2.6%) compared to the fourth quarter of 2023. EfTEN Real Estate Fund AS' consolidated sales revenue for the first 12 months of 2024 was 32.238 million euros, an increase of 421 thousand euros (1%) compared to the previous year. The Group's net rental income for the first 12 months of 2024 totalled 29.977 million euros, i.e. 369 thousand euros more than in 2023. The Group's net profit for the same period was 13.564 million euros (2023: 1.0 million euros).
The consolidated net rental income margin was 93% in 2024 (2023: same), thus costs directly related to property management (including land tax, insurance, maintenance and improvement costs) and marketing costs accounted for 7% (2023: same) of sales revenue.
The Group's assets as of 31.12.2024 were 398.763 million euros (31.12.2023: 380.944 million euros), including the fair value of investment properties accounting for 94% of the assets (31.12.2023: the same).
Investment portfolio
As of the end of 2024, the Group has 36 (31.12.2023: 35) commercial real estate investments, the fair value of which at the balance sheet date is 373.815 million euros (31.12.2023: 357.916 million euros) and the acquisition cost is 370.561 million euros (31.12.2023: 354.408 million euros). In addition to the investment properties owned by the Fund's subsidiaries, the Group's 50% joint venture owns the Palace Hotel in Tallinn, the fair value of which as of 31.12.2024 was 8.630 million euros (31.12.2023: 9.0 million euros).
Investments in 2024
The Group made investments in both new properties and the existing portfolio in 2024 totaling 21.6 million euros, including the acquisition of a logistics center in Tallinn, Härgmäe 8, by the Group's subsidiary EfTEN Härgmäe OÜ in the autumn of 2024, paying a total of 8.8 million euros for the property, and the acquisition of a logistics center under development in Tallinn, Paemurru tee 3, by the Group's subsidiary EfTEN Paemurru OÜ in the autumn of 2024, paying a total of 1.2 million euros for the property. In addition, the Group paid a total of 2.76 million euros for the development of the Paemurru logistics center in 2024.
In 2024, the group completed the first phase of development at the Ermi nursing home in Tartu, where a total of 3.19 million euros were invested in the reporting year. In addition, construction on the C-building of the Valkla nursing home began, with investments reaching 788 thousand euros in 2024.
Major investments in existing buildings were made in 2024 in the Saules Miestas shopping center, where the public areas were renovated for 1.8 million euros, and in the AirBaltic office building in Riga, where 665 thousand euros were invested in the building's insulation work. Of the remaining investments, 1.6 million euros was spent on the reconstruction and modernization of rental spaces in various office buildings.
Sales in 2024
In September 2024, the Group sold the Tähesaju Hortes property for 4.675 million euros. Despite the payment difficulties of the tenant of the Tähesaju property, the Group earned nearly 300 thousand euros in net cash flow from the investment since its completion in 2018. The Group invested the funds received from the sale of the Tähesaju property in the acquisition of the Härgmäe logistics center.
Rental income
In 2024, the group earned a total of 31.076 million euros in rental income, which is 2% more than in 2023. Rental income increased the most in shopping centers. Rental income in the office segment decreased mainly due to the expiration of the lease agreement with the anchor tenant of the Menulio 11 office building in Vilnius and the related vacancy. In 2024, renovation works of the vacant rental premises in the Menulio 11 office building began, which are planned to be completed during 2025.
The Group's investment property vacancy rate per portfolio was 2.6% as of 31 December 2024 (unchanged from 31 December 2023). The highest vacancy rate was in the office segment (11.3%), where filling vacant rental properties has taken longer than previously expected.
Financing
In the fourth quarter of 2024, two new subsidiaries of the fund, EfTEN Härgmäe OÜ and EfTEN Paemurru OÜ, signed loan agreements for the acquisition and development of real estate. In 2024, the fund's subsidiaries EfTEN Autokeskus OÜ and EfTEN Jurkalne SIA extended the loan agreements concluded with the bank. The loan agreements of six subsidiaries of the group will expire within the next 12 months, the balance of which as of 31.12.2024 was 20,380 thousand euros. The LTV of the expiring loan agreements ranges from 27% to 48%, and the real estate investments have a stable rental cash flow, therefore, according to the group's management, there will be no obstacles to extending the loan agreements.
The weighted average interest rate of the Group's loan agreements as of 31.12.2024 was 4.89% (31.12.2023: 5.91%) and the LTV (Loan to Value) was 40% (31.12.2023: 42%). All loan agreements of the Fund's subsidiaries were linked to a floating interest rate in 2024.
The Fund's interest coverage ratio (ICR) for loans was 3.0 in 2024. Due to the increase in EURIBOR in the first half of 2024 and the increase in liabilities, the interest coverage ratio was 10% lower than in 2023.
Information on shares
In the last quarter of 2024, the fund carried out a share issue, during which 620,544 new shares were subscribed for at a price of 19 euros, of which the nominal value was 10 euros and the share premium was 9 euros. A total of 11.79 million euros was raised during the issue, including an increase in the fund's share capital by 6.205 million euros and a share premium of 5.585 million euros. There were 0.159 million euros in expenses directly related to the issue. As of 31.12.2024, the fund had 11,440,340 shares.
The net asset value (NAV) of EfTEN Real Estate Fund AS shares as of 31.12.2024 was 20.37 euros (31.12.2023: 20.21 euros). EfTEN Real Estate Fund AS's net asset value per share increased by 0.8% in 2024. The fund distributed dividends in the total amount of 10.82 million euros in April 2024. Without the distribution the net asset value of EfTEN Real Estate AS shares would have increased by 4.9% in 2024.
During 2024, the group has earned free cash flow of 11.109 million euros (2023: 11.314 million euros), of which 8.887 million euros (77.68 eurocents per share) could be considered gross dividends according to the fund's dividend policy The fund's management plans to refinance bank loans in the spring of 2025, where the LTV (Loan-to-Value) has fallen significantly below the fund's financing policy threshold, and the operating cash flow exceeds loan and interest payments by more than twice. According to the management's estimate, the refinancing would allow to increase the distributed dividend up to 1.1 euros per share (net).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| IV quarter | 12 months | |||
| 2024 | 2023 | 2024 | 2023 | |
| € thousands | ||||
| Revenue | 8,314 | 8,103 | 32,238 | 31,817 |
| Cost of services sold | -337 | -506 | -1,569 | -1,626 |
| Gross profit | 7,977 | 7,597 | 30,669 | 30,191 |
| Marketing costs | -203 | -190 | -692 | -583 |
| General and administrative expenses | -987 | -978 | -3,666 | -3,546 |
| Profit / loss from valuation of investment properties | 831 | -7,759 | -1,038 | -13,941 |
| Other operating income and expense | 1 | -2 | 46 | 21 |
| Operating profit/loss | 7,619 | -1,332 | 25,319 | 12,142 |
| Profit / loss from joint ventures | 53 | -474 | -118 | -499 |
| Interest income | 62 | 87 | 278 | 184 |
| Other finance income and expense | -2,052 | -2,277 | -8,696 | -7,970 |
| Profit before income tax | 5,682 | -3,996 | 16,783 | 3,857 |
| Income tax expense | -2,222 | -1,884 | -3,219 | -2,857 |
| Net profit for the reporting period | 3,460 | -5,880 | 13,564 | 1,000 |
| Net comprehensive profit for the reporting period | 3,460 | -5,880 | 13,564 | 1,000 |
| Earnings per share | ||||
| - basic | 0.32 | -0.54 | 1.25 | 0.09 |
| - diluted | 0.32 | -0.54 | 1.25 | 0.09 |
| 31.12.2024 | 31.12.2023 | |
| € thousands | ||
| ASSETS | ||
| Cash and cash equivalents | 18,415 | 14,712 |
| Short-term deposits | 2,092 | 3,400 |
| Receivables and accrued income | 2,055 | 2,360 |
| Prepaid expenses | 138 | 106 |
| Total current assets | 22,700 | 20,578 |
| Long-term receivables | 154 | 214 |
| Shares in joint ventures | 1,960 | 2,078 |
| Investment property | 373,815 | 357,916 |
| Property. plant and equipment | 134 | 158 |
| Total non-current assets | 376,063 | 360,366 |
| TOTAL ASSETS | 398,763 | 380,944 |
| LIABILITIES AND EQUITY | ||
| Borrowings | 25,625 | 16,907 |
| Liabilities and prepayments | 3,245 | 3,417 |
| Total current liabilities | 28,870 | 20,324 |
| Borrowings | 123,795 | 130,849 |
| Other long-term liabilities | 1,928 | 1,790 |
| Deferred income tax liability | 11,097 | 9,283 |
| Total non-current liabilities | 136,820 | 141,922 |
| Total liabilities | 165,690 | 162,246 |
| Share capital | 114,403 | 108,198 |
| Share premium | 90,306 | 84,721 |
| Statutory reserve capital | 2,799 | 2,749 |
| Retained earnings | 25,565 | 23,030 |
| TOTAL EQUITY | 233,073 | 218,698 |
| TOTAL LIABILITIES AND EQUITY | 398,763 | 380,944 |
CFO
Phone +372 6559 515
E-mail: [email protected]
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