Baltic Horizon: Baltic Horizon Fund consolidated audited results for 2021

Baltic Horizon FundManagement 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 on the Nasdaq 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 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- 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
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   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,
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%
SC Retail 9,472 5,444 5.2% 6.8% 89.2%
Total   70,676 34,123 5.1% 5.5% 93.2%
Total portfolio   327,359 144,081 5.0% 5.2% 92.1%
  1. Based on the latest valuation as at 31 December 2021 and recognised right-of-use assets.
  2. Direct property yield (DPY) is calculated by dividing annualized NOI by the acquisition value and subsequent capital expenditure of the property.
  3. 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

BHF annual report 2021 EN

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