The net asset value (NAV) of the EfTEN United Property Fund was 10,85 euros as of January 31, 2023, increasing by 0,3% over the month. Since the start of the fund in late June 2021 the total return has been 11,7% and the return on invested capital 12,7%. The fund has 30% of its capital as uninvested.
In February, important changes took place in the fund’s two major investments: (i) In the largest investment of the former office building of Danske in Vilnius, we signed a new lease agreement, which took the vacancy of the building to 0%. Through the change of tenant mix, we have increased the rental income of this building by 16% in a year; (ii) Rae municipality issued construction permits for the first stage of buildings for the fund’s only real estate development investment in Uus-Järveküla.
Since the middle of January, we have observed the first signs of changes we have long expected in the Baltic commercial real estate market. The first sellers are gradually adjusting their price expectations downwards and offers with a lower price level have come to market. At the moment, it is mainly limited to the so-called class B office segment in Vilnius, where EfTEN United Property Fund already has considerable exposure. In the light of relatively strong business cycle data in Europe over the past weeks, the future expectations of Euribor have recently been adjusted higher in in financial markets. This will further squeeze the cash flow of companies with a high debt burden (including in the real estate sector). Therefore, we expect the fall in prices in commercial real estate to spill-over also to other segments in the Baltics.