EfTEN: Net asset value of EfTEN Real Estate Fund III AS as of 31.12.2021

EfTEN Real Estate FundThe net asset value (NAV) of AS was 19,1057 euros as of 31 December 2021, increasing by 4.2% during December. The net asset value of the EPRA share (net book value excluding the deferred income tax liability and the fair value of interest derivatives) was 20.25 euros as of 31.12.2021. EPRA NAV increased by 4.5% in December.

Commentary by the fund manager,

The year 2021 was more successful than expected for AS. Despite the two waves of the coronavirus, we were able to increase both rental income and EBITDA in each segment of commercial real estate, even without considering the revenue from new investments. The vacancy of commercial premises in the portfolio remained at a record low level, less than 1%. The revaluation of investment properties valuation brought a one-time additional profit of 6.4 million euros during 2021, and the unleveraged initial yield of the portfolio was 7.1%. In 2021, the fund earned a total of 4.55 million euros in free cash flow, of which, according to the Fund’s dividend policy, gross dividends would be 3.64 million euros. Taking into account the obligation to maintain a minimum cash balance arising from the special loan terms of the fund’s subsidiaries and the short-term liquidity needs, the Fund’s Management Board proposes to pay more dividends than required by the dividend policy – a total of 4.06 million euros (80 cents per share). Dividend payments in the spring of 2022 require both the approval of the banks and the approval of the general meeting.

As of 31.12.2021, the fund has 5.9 million euros of uninvested equity, the safe investment of which is a priority for the fund’s management. Considering the fact that the level of yields on transactions in the Baltic commercial real estate market has been steadily declining in recent years, the fund’s management does not plan to organize a new share issue during the current financial year, given the current situation. For investors who would like to continue to invest in the real estate market to protect against inflation, the Management Company may offer to consider United Porperty Fund, which invests not only in commercial real estate but also in real estate more broadly and is open to all retail investors.

Financial overview

In December, the consolidated sales revenue of AS earned a total of 1,233 thousand euros, which is 7.7% more than in November. The increase in sales revenue came mainly from the turnover rents of the Saules Miestas shopping center. The consolidated EBITDA of the fund was 418 thousand euros in December, which is 527 thousand euros lower than in November, mainly due to the success fee calculated for the management company from the closing of the stock exchange in 2021.

In December, International, an independent real estate appraiser of the Fund, conducted a valuation of investment properties, which increased the value of the Fund’s real estate portfolio by 2.8% (4,423 thousand euros). Due to the revaluation gain on investment properties, the fund’s net profit was also higher than usual in December, reaching 3,924 thousand euros (the fund’s net profit was 707 thousand euros in November). The value of the fund’s real estate portfolio increased both from a change in exit yield in average from 7.6% to 7.3% and more optimistic NOI (net operating income from rental operations) expectations.

During the 12 months of this year, the fund has earned EBITDA of 10.14 million euros (18.5% more than last year) with sales revenue of 12.9 million euros (20.9% more than last year). The Fund’s unaudited consolidated net profit for 2021 is 13.1 million euros (2020: 3.3 million euros).

The consolidated equity of AS was 96.914 million euros as of 31.12.2021 (31.12.2020: 71.483 million euros).

EREF III reports monthly 12-2021

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