EfTEN Real Estate Fund AS unaudited results for 2nd quarter and 6 months 2023

EftenThe upward trend in interest rates, which started in mid-2022, continued in the first half of 2023. Within the euro area, including the Baltic countries, loans are based on the EURIBOR. Over the past six months, depending on the duration, the EURIBOR rate increased by approximately 1.5 percentage points. Consequently, this has resulted in higher financial costs for companies operating in the real estate sector. Moreover, the market interest rate, which impacts the weighted average cost of capital (WACC) used to discount the cash flows for valuation of investment properties, has also increased. Typically, such increases lead to a decline in the fair value of investment properties.

Real estate companies and funds with significant dEftenebt burdens, particularly those that have raised capital not only from banks but also from financial markets through bonds, are facing the most challenging circumstances. While the real estate sector was favored by bond investors in the previous year, the situation has reversed this year. Real estate companies in Europe and the Baltics, seeking to refinance their bonds, have had to accept significantly smaller volumes and, in some cases, significantly higher borrowing costs. The real estate investments owned by subsidiaries of EfTEN Real Estate Fund AS has been fully financed through bank loans, with loan-to-value (LTV) ratios ranging from 29% to 52%. Consequently, refinancing of these loans has proceeded as usual.

During the first half of the year, the impact of rising interest rates was somewhat mitigated by lower energy costs and increased rental income. Despite the economic downturn in the Baltic countries, the fund’s tenants exhibited strong payment behavior. As of the end of June 2023, the vacancy rate in the real estate portfolio of EfTEN Real Estate Fund AS stood at less than 2%. Additionally, compared to the first half of 2022, rental income, calculated on a comparable basis (Like-for-Like), increased by 12%.

In June, Colliers International, the real estate investment appraiser of the fund, conducted a valuation of EfTEN Real Estate Fund AS’s real estate portfolio. The valuations resulted in a 1.7% decrease (€6.18 million) of the value of the fund’s investment properties. This decrease in portfolio value can be largely attributed to the rise in the weighted average cost of capital (WACC) used to discount cash flows, resulting from the increase in EURIBOR over the past six months.

On January 1, 2023, EfTEN Real Estate Fund AS (formerly EfTEN Real Estate Fund III AS) merged with EfTEN Kinnisvarafond AS. Following the merger, the fund’s consolidated assets increased by €211 million, from €182 million to €393 million, and its equity increased by €126 million, from €104 million to €230 million. The merger was officially recorded in the business register on February 28, 2023.

As a consequence of the merger, EfTEN Real Estate Fund AS’s real estate portfolio was incorporated into the subsidiaries of EfTEN Kinnisvarafond AS. This addition included 17 new investment properties in Estonia, Latvia, and Lithuania, with a fair value of €196.3 million, and one investment property owned jointly through a 50% share, valued at €10 million. Consequently, following the merger, the fund’s real estate portfolio offers an even better diversification across sectors and tenants.

EfTEN Real Estate Fund AS consolidated sales revenue was €15.749 million in the first half of 2023 (compared to €6.988 million in the first half of 2022). The group’s net rental income amounted to a total of €14.704 million in the same period (compared to €6.666 million in 2022). The group’s net profit for the first half of 2023 was €2.445 million (compared to €7.882 million in 2022).

As of June 30, 2023, the group’s assets amounted to €381.274 million (compared to €181.956 million on December 31, 2022), with investment properties accounting for 95% of the assets (compared to 93% on December 31, 2022).

As of the end of June 2023, the group owned 35 investment properties (compared to 18 on December 31, 2022), with a fair value of €361.498 million on the balance sheet date (compared to €168.875 million on December 31, 2022) and an acquisition cost of €349.119 million (compared to €151.426 million on December 31, 2022). Furthermore, the group’s joint venture held the Palace hotel in Tallinn, with a fair value of €9.8 million as of June 30, 2023.

During the first half of 2023, the fund’s subsidiaries extended a total of six loan agreements for a duration of three to five years. The interest margin on four loans decreased by 0.05-0.5 percentage points, while the EURIBOR of five loans was reduced from 6 months to 1 months and from 6 months to 3 months for one loan.

Within the next 12 months, the loan agreements of three subsidiaries within the group, with a balance of €5,395 thousand as of June 30, 2023, will expire. The loan-to-value (LTV) ratios for these expiring loan agreements range from 37% to 51%, and given the stable and strong rental cash flow of the investment properties, the group’s management anticipates no obstacles in extending the loan agreements.

The weighted average interest rate for the group’s loan agreements reached 5.4% by the end of June (compared to 3.7% on December 31, 2022) due to changes in EURIBOR. The loan-to-value (LTV) ratio stood at 42% (compared to 40% on December 31, 2022). All loan agreements for the fund’s subsidiaries are tied to floating interest rates, and all loans are being serviced as usual. The cash flow generated from the business operations of all investment properties pledged as collateral for the loan surpasses the loan payments.

As of June 30, 2023, the EPRA net value (EPRA NDV) of each share of EfTEN Real Estate Fund AS amounted to €20.35 (compared to €19.86 on June 30, 2022). The EPRA net value of the fund’s share experienced a 1.0% decrease in the first half of 2023 (compared to a 4.0% increase in the first half of 2022).



  2nd quarter months
€ thousands 2023 2022 2023 2022
Sales income 7,961 3,530 15,749 6,988
Cost of services sold -363 -71 -757 -131
Gross profit 7,598 3,459 14,992 6,857
Marketing costs -192 -117 -288 -191
General and administrative expenses -860 -448 -1 727 -903
Profit / loss from the changes in investment properties fair value -6,182 3,702 -6,182 3,702
Other operating income and expense 3 17 13 43
Operating profit 367 6,613 6,808 9,508
Profit / loss from joint ventures -100 0 -109 0
Interest income 14 0 20 0
Other finance income and expense -1 987 -360 -3,537 -722
Profit before income tax -1,706 6,253 3,182 8,786
Income tax expense -483 -649 -737 -904
Net profit for the reporting period -2,189 5,604 2,445 7,882
Consolidated profit for the reporting period -2,189 5,604 2,445 7,882
Earnings per share        
   – basic -0.63 1.10 -0.20 1.55
   – diluted -0.63 1.10 -0.20 1.55



30.06.2023 31.12.2022
€ thousands
Cash and cash equivalents 12,616 11,331
Short-term deposits 2,480 0
Receivables and accrued income 1,546 1,522
Prepaid expenses 132 49
Inventory 1 0
Total current assets 16,775 12,902
Long-term receivables 352 61
Shares in joint ventures 2,468 0
Investment property 361,498 168,875
Property, plant, and equipment 180 116
Intangible assets 1 2
Total non-current assets 364,499 169,054
TOTAL ASSETS 381,274 181,956
Borrowings 11,416 22,058
Payables and prepayments 1,985 1,461
Total current liabilities 13,401 23,519
Borrowings 138,563 45,917
Other long-term liabilities 1,886 1,008
Deferred income tax liability 7,280 7,248
Total non-current liabilities 147,729 54,173
Total liabilities 161,130 77,692
Share capital 108,198 50,725
Share premium 84,721 16,288
Statutory reserve capital 2,749 2,149
Retained earnings 24,476 35,102
Total equity 220,144 104,264


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