Baltic Horizon: Baltic Horizon Fund consolidated unaudited results for Q1 2022

Baltic Horizon FundManagement Board of AS has approved the unaudited consolidated interim financial statements of Baltic Horizon Fund (the Fund) for the three months of 2022.

Distributions to unitholders for Q1 2022 Fund results

On 28 April 2022, the Fund declared a cash distribution of EUR 1,555 thousand (EUR 0.013 per unit) to the Fund unitholders for Q1 2022 results. The payout also represents a 6.3% rolling distribution yield for the past 12 months based on the closing unit of the last day of Q1 2022 on the Nasdaq Stock Exchange.

Net result and net rental income

The Group recorded a net profit of EUR 2.0 million for Q1 2022 against a net profit of EUR 1.9 million for Q1 2021. The net result was significantly impacted by strong recovery of the Galerija Centrs operating performance as fewer COVID-19 rent reliefs have been granted to tenants in 2022. The positive impact of the increase in net rental income was also influenced by a decrease in administrative expenses. Earnings per unit for Q1 2022 were EUR 0.02 (Q1 2021: EUR 0.02).

The Group earned net rental income of EUR 4.2 million in both Q1 2022 and Q1 2021. The results for Q1 2021 still included EUR 0.3 million of net rental income from Headquarters, which was sold in Q4 2021 and did not contribute to Q1 2022 results. Rent indexations and recovery of income improved the net rental income of the same portfolio mix (like-for-like portfolio).

Gross Asset Value (GAV)

At the end of Q1 2022, the Fund’s GAV was EUR 345.6 million (31 December 2021: EUR 346.3 million). The change is mainly related to a dividend pay-out in Q1 2022. The Fund made capital investments (EUR 1.9 million) in the Meraki office building development project during Q1 2022. The Fund aims to carry on with the construction of the Meraki office building throughout 2022 and 2023. An additional EUR 2.2 million was invested in other (re)development projects.

Net Asset Value (NAV)

At the end of Q1 2022, the Fund’s NAV slightly increased to EUR 133.0 million (31 December 2021: EUR 132.6 million). The increase in operational performance and positive cash flow hedge reserve movement of EUR 0.7 million over the quarter was offset by a EUR 2.3 million dividend distribution to the unitholders. As at 31 March 2022, IFRS NAV per unit stood at EUR 1.1114 (31 December 2021: EUR 1.1082), while EPRA net tangible assets and EPRA net reinstatement value were EUR 1.1902 per unit (31 December 2021: EUR 1.1884). EPRA net disposal value was EUR 1.1100 per unit (31 December 2021: EUR 1.1086).

Investment properties

The occupancy rate as of 31 March 2022 was 92.4% (31 December 2021: 92.1%). The overall occupancy rates in the portfolio rose after the successful launch of the North Star office hotel and filling the premises with small tenants. Increasing occupancy figures were supplemented with new leases in Lincona and Europa. Occupancy rates in the office segment remain strong at around 98% after the conclusion of new leases. Positive momentum in office leasing is expected to continue in Q2 2022. Retail leasing teams have been expanded to fasten the leasing process. The Fund is having in-depth negotiations with potential anchor tenants for shopping centres. The average direct property yield during Q1 2022 increased notably to 5.0% (Q4 2021: 4.5%). The net initial yield for the whole portfolio for Q1 2022 was 5.3% (Q4 2021: 4.8%). Property yields increased compared to Q4 2021 after a strong recovery of Galerija Centrs results following the lift of lockdowns at the end of 2021 and positive rent indexations across the portfolio.

The Baltic Horizon Fund portfolio consists of 14 cash flow generating investment properties in the Baltic capitals and an investment property under construction on the Meraki land plot. At the end of Q1 2022, the fair value of the Fund’s portfolio was EUR 331.8 million (31 December 2021: EUR 327.4 million) and incorporated a total net leasable area of 144,071 sq. m. During Q1 2022, the Fund invested EUR 0.3 million in the existing property portfolio and EUR 4.1 million in the reconstruction or development projects.

Key earnings figures

EUR ‚Äė000 ¬† ¬† ¬† ¬† Q1 2022 Q1 2021 Change (%)
Net rental income         4,193 4,173 0.5%
Administrative expenses (659) (745) (11.5%)
Other operating income 7
Valuation losses on investment properties (6) (4) 50.0%
Operating profit         3,535 3,424 3.2%
Net financing costs (1,442) (1,390) (3.7%)
Profit before tax         2,093 2,034 2.9%
Income tax (97) (129) (24.8%)
Net profit for the period       1,996 1,905 4.8%
Weighted average number of units outstanding (units) 119,635,429 119,635,429
Earnings per unit (EUR)       0.02 0.02

Key financial position figures

EUR ‚Äė000 ¬† ¬† ¬† 31.03.2022 31.12.2021 Change (%)
Investment properties in use 318,430 315,959 0.8%
Investment property under construction 13,393 11,400 17.5%
Gross asset value (GAV)     345,592 346,338 (0.2%)
Interest-bearing loans and bonds 198,425 198,571 (0.1%)
Total liabilities 212,628 213,754 (0.5%)
IFRS Net asset value (IFRS NAV)     132,964 132,584 0.3%
EPRA Net Reinstatement Value (EPRA NRV)     142,387 142,176 0.1%
Number of units outstanding (units) 119,635,429 119,635,429
IFRS Net asset value (IFRS NAV) per unit (EUR) 1.1114 1.1082 0.3%
EPRA Net Reinstatement Value (EPRA NRV) per unit (EUR) 1.1902 1.1884 0.2%
Loan-to-Value ratio (%) 59.8% 60.7%
Average effective interest rate (%) 2.8% 2.7%

Overview of the Fund’s investment properties as of 31 March 2022

Property name Sector Fair value1
(EUR ‚Äė000)
NLA
(sq. m)
Direct property yield
 Q1 20222
Net initial yield
Q1 20223
Occupancy rate
Vilnius, Lithuania            
Duetto I Office 17,347 8,587 8.0% 6.9% 100.0%
Duetto II Office 19,683 8,674 7.6% 7.1% 100.0%
Europa SC Retail 38,951 16,844 1.3% 1.4% 81.8%
Domus Pro Retail Park Retail 16,268 11,226 8.0% 7.8% 98.7%
Domus Pro Office Office 7,823 4,831 8.3% 6.8% 100.0%
North Star Office 20,031 10,550 6.2% 6.5% 97.1%
Meraki Development 13,393
Total   133,496 60,712 5.3% 5.2% 94.2%
Riga, Latvia            
Upmalas Biroji BC Office 21,959 10,459 7.6% 8.3% 100.0%
Vainodes I Office 18,161 8,052 6.5% 7.8% 100.0%
LNK Centre Office 16,840 7,452 6.4% 6.6% 100.0%
Sky SC Retail 5,106 3,249 8.2% 8.2% 97.4%
Galerija Centrs Retail 65,576 20,022 3.2% 3.6% 74.1%
Total Riga   127,642 49,234 5.0% 5.6% 89.3%
Tallinn,            
Postimaja & CC Plaza complex Retail 29,775 9,147 2.6% 3.2% 93.9%
Postimaja & CC Plaza complex Leisure 14,442 8,664 7.2% 5.9% 100.0%
Lincona Office 16,996 10,870 6.6% 6.1% 90.8%
Pirita SC Retail 9,472 5,444 4.5% 5.9% 89.2%
Total   70,685 34,125 4.5% 4.8% 93.7%
Total portfolio   331,823 144,071 5.0% 5.3% 92.4%
  1. Based on the latest valuation as at 31 March 2022, subsequent capital expenditure 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 ‚Äė000 01.01.2022-
31.03.2022
01.01.2021-
31.03.2021
Rental income 4,959 4,677
Service charge income 1,304 1,217
Cost of rental activities (2,070) (1,721)
Net rental income 4,193 4,173
Administrative expenses (659) (745)
Other operating income 7
Valuation losses on investment properties (6) (4)
Operating profit 3,535 3,424
Financial income
Financial expenses (1,442) (1,390)
Net financial expenses (1,442) (1,390)
     
Profit before tax 2,093 2,034
Income tax charge (97) (129)
Profit for the period 1,996 1,905
     
Other comprehensive income that is or may be reclassified to profit or loss in subsequent periods
Net gain on cash flow hedges 721 210
Income tax relating to net gain on cash flow hedges (64) (15)
Other comprehensive income, net of tax, that is or may be reclassified to profit or loss in subsequent periods 657 195
     
Total comprehensive income for the period, net of tax 2,653 2,100
     
Basic and diluted earnings per unit (EUR) 0.02       0.02

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

EUR ‚Äė000 31.03.2022 31.12.2021
Non-current assets    
Investment properties 318,430 315,959
Investment property under construction 13,393 11,400
Intangible assets 8 9
Property, plant and equipment 2 2
Other non-current assets 23 23
Total non-current assets 331,856 327,393
     
Current assets    
Trade and other receivables 2,959 2,708
Prepayments 315 137
Cash and cash equivalents 10,462 16,100
Total current assets 13,736 18,945
Total assets 345,592 346,338
     
Equity    
Paid in capital 145,200 145,200
Cash flow hedge reserve (172) (829)
Retained earnings (12,064) (11,787)
Total equity 132,964 132,584
     
Non-current liabilities    
Interest-bearing loans and borrowings 152,806 157,471
Deferred tax liabilities 6,456 6,297
Derivative financial instruments 94 756
Other non-current liabilities 1,185 1,103
Total non-current liabilities 160,541 165,627
     
Current liabilities    
Interest-bearing loans and borrowings 46,189 41,676
Trade and other payables 5,095 5,223
Income tax payable 8 5
Derivative financial instruments 50 109
Other current liabilities 745 1,114
Total current liabilities 52,087 48,127
Total liabilities 212,628 213,754
Total equity and liabilities 345,592 346,338

BHF quarterly report Q1 2022

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