Management Board of Northern Horizon Capital AS has approved the audited financial results of Baltic Horizon Fund (the Fund) for the year 2021. The financial results remained unchanged compared to the preliminary disclosure on 15 February 2022.
Distributions to unitholders for 2021 Fund results
In total, the Fund declared a cash distribution of EUR 6,939 thousand from the operating results of 2021 (EUR 1,316 thousand from Q1 2021, EUR 1,316 thousand from Q2 2021, EUR 2,034 thousand from Q3 2021 and EUR 2,273 thousand from Q4 2021). Dividends for the operating results of 2021 correspond to a gross yield of 5.4% based on the closing price on the Nasdaq Tallinn Stock Exchange at 31 December 2021.
Net result and net rental income
In 2021, the Group recorded a net profit of EUR 1.4 million as compared to a net loss of EUR 13.5 million in 2020. Compared to 2020, the Fund recognised smaller valuation losses on investment properties but a decrease in net rental income throughout 2021. Even with hard COVID-19 restrictions in 2021, the Fund managed to maintain the positive operational performance of its investment properties. The net result for the whole 2021 was mostly impacted by a negative valuation result of EUR 7.2 million. Year-end valuations showed recovery as the Fund brought down overall yearly valuation losses by recognising a valuation gain of EUR 7.1 million in Q4 2021. Excluding the valuation impact on the net result, net profit for 2021 would have amounted to EUR 8.6 million (2020: EUR 11.7 million). Earnings per unit for 2021 were positive at EUR 0.01 (2020: negative at EUR 0.12). Earnings per unit excluding valuation losses on investment properties amounted to EUR 0.07 (2020: EUR 0.10).
In 2021, the Group earned net rental income of EUR 17.0 million, a decrease of 14.7% compared to the net rental income of EUR 19.9 million for 2020. Net rental income decreased due to increased vacancies across portfolio, relief measures granted to tenants during the pandemic and disposal of G4S Headquarters in November 2021.
Portfolio properties in the office segment contributed 63.0% (2020: 55.8%) of net rental income in 2021 followed by the retail segment with 32.4% (2020: 40.1%) and the leisure segment with 4.6% (2020: 4.1%).
During 2021, investment properties in Lithuania and Latvia contributed 38.1% (2020: 36.4%) and 36.0% (2020: 38.3%) of net rental income, respectively, while investment properties in Estonia contributed 25.9% (2020: 25.3%). In 2021, Estonia’s share in the Fund’s portfolio decreased due to the disposal of G4S Headquarters.
Gross Asset Value (GAV)
At the end of December 2021, the Fund’s GAV was EUR 346.3 million (31 December 2020: EUR 355.6 million), which was a drop of 2.6% over the period. The decrease is mainly related to the negative property revaluation of EUR 7.2 million and the disposal of G4S Headquarters which was slightly offset by capital investments in assets and an increase in the cash balance. The Group made capital investments (EUR 7.0 million) in the Meraki office building development project during 2021. The Fund aims to carry on with the construction of the Meraki office building throughout 2022/2023. An additional EUR 2.1 million was invested in other (re)development projects. 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)
At the end of December 2021, the Fund’s NAV slightly decreased to EUR 132.6 million (31 December 2020: EUR 136.3 million) due to a negative overall investment property revaluation for the financial year. Compared to the year-end 2020 NAV, the Fund’s NAV decreased by 2.7%. The increase in operational performance was offset by a EUR 6.0 million dividend distribution to the unitholders. As at 31 December 2021, IFRS NAV per unit stood at EUR 1.1082 (31 December 2020: EUR 1.1395), while EPRA net tangible assets and EPRA net reinstatement value were EUR 1.1884 per unit (31 December 2020: EUR 1.2219). EPRA net disposal value was EUR 1.1086 per unit (31 December 2020: EUR 1.1435).
Interest-bearing loans and bonds
During 2021, the Fund completed a private placement of 18 months secured bonds of EUR 4.0 million. The bonds bear a fixed-rate coupon of 5.0% payable semi-annually. The net proceeds from the issuance of the bonds were used for financing the construction of the Meraki office building. The Fund also fully repaid the G4S Headquarters bank loan of EUR 7.8 million and made a partial EUR 3.0 million early repayment of the Europa bank loan. Outstanding bank loans also decreased slightly due to regular bank loan amortisation. Annual loan amortisation accounts for 0.2% of total debt outstanding. After the bond subscription and loan repayments interest-bearing loans and bonds (excluding lease liabilities) decreased to EUR 198.6 million (31 December 2020: EUR 205.6 million).
Property performance
| EUR ‘000 | 2021 | 2020 | Change (%) | ||||||
| Net rental income | 17,004 | 19,934 | (14.7%) | ||||||
| Administrative expenses | (2,869) | (2,918) | (1.7%) | ||||||
| Other operating income | 444 | 204 | 117.6% | ||||||
| Losses on disposal of investment properties | (71) | – | – | ||||||
| Valuation losses on investment properties | (7,161) | (25,245) | (71.6%) | ||||||
| Operating profit (loss) | 7,347 | (8,025) | 191.6% | ||||||
| Net financing costs | (5,705) | (5,521) | 3.3% | ||||||
| Profit (loss) before tax | 1,642 | (13,546) | 112.1% | ||||||
| Income tax | (229) | 5 | (4,680.0%) | ||||||
| Net profit (loss) for the period | 1,413 | (13,541) | 110.4% | ||||||
| Weighted average number of units outstanding (units) | 119,635,429 | 119,635,429 | – | ||||||
| Earnings per unit (EUR) | 0.01 | (0.12) | 110.4% | ||||||
| Property name | Sector | Fair value1 (EUR ‘000) | NLA (sq. m) | Direct property yield2 | Net initial yield3 | Occupancy rate |
| Vilnius, Lithuania | ||||||
| Duetto I | Office | 17,345 | 8,587 | 8.2% | 7.4% | 100.0% |
| Duetto II | Office | 19,683 | 8,674 | 7.3% | 7.1% | 100.0% |
| Europa SC | Retail | 36,737 | 16,856 | 2.7% | 2.7% | 78.8% |
| Domus PRO Retail Park | Retail | 16,255 | 11,226 | 7.3% | 7.1% | 99.4% |
| Domus PRO Office | Office | 7,820 | 4,831 | 8.3% | 7.0% | 100.0% |
| North Star | Office | 19,869 | 10,550 | 5.8% | 6.3% | 89.7% |
| Meraki Land | 11,400 | – | – | – | – | |
| Total Vilnius | 129,109 | 60,724 | 5.7% | 5.6% | 92.2% | |
| Riga, Latvia | ||||||
| Upmalas Biroji BC | Office | 21,944 | 10,459 | 7.3% | 7.8% | 100.0% |
| Vainodes I | Office | 18,150 | 8,052 | 6.7% | 7.7% | 100.0% |
| LNK Centre | Office | 16,840 | 7,452 | 6.3% | 6.7% | 100.0% |
| Sky SC | Retail | 5,096 | 3,249 | 7.8% | 8.0% | 97.6% |
| Galerija Centrs | Retail | 65,544 | 20,022 | 1.9% | 2.2% | 79.2% |
| Total Riga | 127,574 | 49,234 | 4.3% | 4.8% | 91.4% | |
| Tallinn, Estonia | ||||||
| Postimaja & CC Plaza complex | Retail | 29,772 | 9,145 | 2.9% | 3.4% | 93.9% |
| Postimaja & CC Plaza complex | Leisure | 14,442 | 8,664 | 6.5% | 5.5% | 100.0% |
| Lincona | Office | 16,990 | 10,870 | 7.0% | 6.9% | 89.1% |
| Pirita SC | Retail | 9,472 | 5,444 | 5.2% | 6.8% | 89.2% |
| Total Tallinn | 70,676 | 34,123 | 5.1% | 5.5% | 93.2% | |
| Total portfolio | 327,359 | 144,081 | 5.0% | 5.2% | 92.1% |
- Based on the latest valuation as at 31 December 2021 and recognised right-of-use assets.
- Direct property yield (DPY) is calculated by dividing annualized NOI by the acquisition value and subsequent capital expenditure of the property.
- The net initial yield (NIY) is calculated by dividing annualized NOI by the market value of the property.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
| EUR ‘000 | 2021 | 2020 | |
| Rental income | 19,495 | 21,697 | |
| Service charge income | 4,901 | 4,990 | |
| Cost of rental activities | (7,392) | (6,753) | |
| Net rental income | 17,004 | 19,934 | |
| Administrative expenses | (2,869) | (2,918) | |
| Other operating income | 444 | 204 | |
| Losses on disposal of investment properties | (71) | – | |
| Valuation losses on investment properties | (7,161) | (25,245) | |
| Operating profit (loss) | 7,347 | (8,025) | |
| Financial income | 1 | 3 | |
| Financial expenses | (5,706) | (5,524) | |
| Net financing costs | (5,705) | (5,521) | |
| Profit (loss) before tax | 1,642 | (13,546) | |
| Income tax charge | (229) | 5 | |
| Profit (loss) before tax | 1,413 | (13,541) | |
| Other comprehensive income that is or may be reclassified to profit or loss in subsequent periods | |||
| Net gain (loss) on cash flow hedges | 898 | (108) | |
| Income tax relating to net (loss) gain on cash flow hedges | (66) | 3 | |
| Other comprehensive income (expense), net of tax, that is or may be reclassified to profit or loss in subsequent periods | 832 | (105) | |
| Total comprehensive income (expense) for the period, net of tax | 2,245 | (13,646) | |
| Basic and diluted earnings per unit (EUR) | 0.01 | (0.12) |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| EUR ‘000 | 31.12.2021 | 31.12.2020 | |
| Non-current assets | |||
| Investment properties | 315,959 | 334,518 | |
| Investment property under construction | 11,400 | 5,474 | |
| Intangible assets | 9 | – | |
| Property, plant and equipment | 2 | 2 | |
| Other non-current assets | 23 | 22 | |
| Total non-current assets | 327,393 | 340,016 | |
| Current assets | |||
| Trade and other receivables | 2,708 | 1,901 | |
| Prepayments | 137 | 352 | |
| Cash and cash equivalents | 16,100 | 13,333 | |
| Total current assets | 18,945 | 15,586 | |
| Total assets | 346,338 | 355,602 | |
| Equity | |||
| Paid in capital | 145,200 | 145,200 | |
| Cash flow hedge reserve | (829) | (1,661) | |
| Retained earnings | (11,787) | (7,218) | |
| Total equity | 132,584 | 136,321 | |
| Non-current liabilities | |||
| Interest bearing loans and borrowings | 157,471 | 195,670 | |
| Deferred tax liabilities | 6,297 | 6,009 | |
| Derivative financial instruments | 756 | 1,736 | |
| Other non-current liabilities | 1,103 | 1,026 | |
| Total non-current liabilities | 165,627 | 204,441 | |
| Current liabilities | |||
| Interest bearing loans and borrowings | 41,676 | 10,222 | |
| Trade and other payables | 5,223 | 3,640 | |
| Income tax payable | 5 | 1 | |
| Derivative financial instruments | 109 | 27 | |
| Other current liabilities | 1,114 | 950 | |
| Total current liabilities | 48,127 | 14,840 | |
| Total liabilities | 213,754 | 219,281 | |
| Total equity and liabilities | 346,338 | 355,602 |
