Baltic Horizon Fund consolidated audited results for 2023
Management Board of Northern Horizon Capital AS
has approved the audited financial results of Baltic Horizon Fund
(the Fund) for the year 2023. The financial results remained
unchanged compared to the preliminary disclosure on 15 February
2024.
Executing our strategy
In a challenging economic landscape
characterized by inflation, interest rate volatility, and recent
geopolitical events, the Fund has assessed various strategic
options to navigate these complexities and ensure future growth.
Over the past year, our focus has been on reshaping our strategy to
foster sustainable value, concentrating efforts on avenues that
promise reliable and consistent growth for our investors. In light
of prevailing market conditions, we firmly believe that the
execution of the ‘Modern City Life’ strategy, introduced to
investors in summer 2023, is paramount to their best interests.
In the coming years, we expect two thirds of the
Fund’s NOI to come from the centrally located ‘Modern City Life’
multi-functional assets. These spaces are meticulously designed to
ignite, elevate and enrich the lives of modern citizens and
communities. The remaining results are expected to be derived
primarily from government-rented premises and select suburban
supermarkets and other segments. Our value proposition hinges on
quality, flexibility, sustainability, and remarkable service,
underpinned by strategic locations tailored to meet the evolving
needs of our clientele.
The focus of the Fund management team is and
will be on these major objectives:
- Portfolio occupancy of at least 90% by end of 2024;
- Loan-to-Value target at 50% or lower and repayment of the bonds
maturing in 2024;
- To consider disposing of non-strategic assets over the next 18
months;
- Clear ESG and refurbishment strategy for the next 1-2 years
with an aim to reach the portfolio’s NOI potential of EUR 18
million by 2027;
- Maintaining 100% BREEAM or LEED certified portfolio;
- Achieving not less than 4 stars from GRESB assessment.
In order to reach those targets, the Fund has
been investing in the new concepts of our centrally located assets
and already introduced the first new anchor tenants such as ARKET,
H&M Home, IKI and food halls Dialogai and BURZMA into the
properties. The Fund has been decreasing its vacancies in Q4
2023-Q1 2024 and while there could be some fluctuations in the
occupancy over the coming quarters, considering the ongoing lease
negotiations with several anchor tenants and with the recently
signed new leases of more than 13,000 sq. m including those in
Upmalas Biroji and Meraki, we believe that the portfolio occupancy
goal of 90% is attainable as many of the new tenants are able to
move in during 2024. Most of the new leases will start generating
rental income from Q2 2024 onwards.
Equally importantly, the management team has
been able to renegotiate the majority of expiring bank loans and in
some cases refinance at more suitable terms. Additionally, we have
divested mature Lithuanian assets in Duetto and Domus PRO, yielding
double-digit returns for our investors. These initiatives align
with our goal of fully repaying the short-term portion of the bonds
issued in May 2023. The Fund is in good cooperation with the
bondholders and has an aim to further improve its capital structure
during 2024, positioning the Fund to seize opportunities presented
by the evolving market landscape.
Outlook
An important milestone in our financial journey
was the refinancing of our EUR 50 million bond issue in Q2 2023. We
carried out a new bond issue, raising EUR 42 million to optimize
our capital structure. The first tranche, amounting to EUR 20
million, matures in May 2024. Following the disposal of the Duetto
properties, the Fund proactively redeemed EUR 7.5 million of the
first tranche in August 2023.
Our management team remains committed to
exploring additional divestment and refinancing opportunities aimed
at repaying the outstanding EUR 12.5 million of the first tranche
before its maturity date. In line with this commitment, we have
successfully negotiated new loans with Šiaulių bankas for Europa
and North Star, resulting in an increase in the outstanding loan
amounts for these assets by EUR 8.6 million. The majority of
received cash from these bank loans will be allocated towards bond
redemption and lowering the overall cost of financing. The Fund has
already announced a bond redemption of EUR 4.5 million on 8 April
2024.
Given the substantial increase in Meraki
occupancy levels, the Fund is strategically poised to explore
leveraging opportunities for this asset. Presently, our management
team is actively engaged in discussions with leading banks across
Lithuania to assess potential financing options. The proceeds from
bank financing would be mainly used for the repayment of the
outstanding short-term bond tranche.
Management is also proactively negotiating with
banks to extend the short-term loans of Galerija Centrs and LNK
Centre. The team is working to create a new strategy for the
properties, which would strengthen their cash flow position and
would allow securing financing at better conditions.
Looking ahead, the Fund is determined to execute
multiple early redemptions of bonds in 2024 through a combination
of refinancing activities and potential asset disposals. These
actions are aligned with our overarching strategy to gradually
reduce leverage levels, with the ultimate goal of reaching a
leverage ratio of approximately 50% or lower after all planned
refinancing activities in 2024.
Baltic Horizon achieves a 100% BREEAM
certified portfolioBaltic Horizon Fund announced the
successful BREEAM certification of its remaining retail assets thus
becoming a member of an elite group of Baltic real estate
investment companies to certify its entire portfolio according to
the highest international environmental standards. The portfolio
currently consists of 12 properties. The last to receive its
certification was the historic building of Galerija Centrs in Riga
that received an impressive BREEAM Very Good certification.
GRESB benchmarkingIn Q3 2023,
Baltic Horizon maintained the GRESB 4-star rating for the second
year in a row. In the assessment, the Fund achieved a total score
of 82 out of 100, representing the third highest GRESB score in the
‘Northern Europe | Diversified – Office/Retail | Listed’ peer
group. The GRESB Real Estate Assessment is an investor driven
global ESG benchmark and reporting framework for listed property
companies, private property funds, developers and investors that
invest directly in real estate. The achievement of GRESB ratings
confirms the Fund’s continuous efforts in the ESG field.
Net result and net rental
incomeIn 2023, the Group recorded a net loss of EUR 23.0
million against a net profit of EUR 3.9 million for 2022. The net
result was strongly impacted by the negative valuation result of
EUR 21.9 million. In 2022, the valuation resulted in a net fair
value loss of EUR 2.9 million. The sale of the shares in BH Domus
Pro UAB, which owns a retail park and an office building, and BH
Duetto UAB, which owns two office buildings, resulted in the loss
on disposal of EUR 4.0 million. The net result was also impacted by
the higher financial expenses. Earnings per unit for 2023 were
negative at EUR -0.19 (2022: positive at EUR 0.03). Audit expenses
for 2023 amounted to EUR 163 thousand and remained at the same
level as in the previous year (2022: EUR 162 thousand).
The Group earned net rental income of EUR 14.6
million in 2023 (2022: EUR 17.4 million). The results for 2023
include two months’ net rental income of the Domus Pro Retail and
Office property (EUR 0.3 million) and five months’ net rental
income of the Duetto properties (EUR 1.2 million), which were sold
in February and May 2023, respectively. The net rental income of
the same portfolio mix (like-for-like portfolio) remained at a
level similar to the previous year.
On an EPRA like-for-like basis, portfolio net
rental income was slightly below the previous year (-0.2%), mainly
due to vacancies in office properties in Latvia due to the expiry
of the agreement with the main tenant in Upmalas Biroji BC and
EMERGN's decision to reduce their rented area in LNK Centre.
Investment propertiesAt the end
of 2023, the Baltic Horizon Fund portfolio consisted of 12 cash
flow generating investment properties in the Baltic capitals. The
fair value of the Fund’s portfolio was EUR 250.4 million (31
December 2022: EUR 333.1 million) and incorporated a total net
leasable area of 119.7 thousand sq. m. During 2023 the Group
sold the Domus PRO buildings for approximately EUR 23.5 million and
the Duetto I and Duetto II buildings for approximately EUR 37
million, invested EUR 1.1 million in reconstruction projects and
EUR 2.3 million in the existing property portfolio.
Gross Asset Value (GAV)At the
end of 2023, the Fund’s GAV was EUR 261.1 million (31 December
2022: EUR 344.0 million), 24.1% lower than at the end of 2022. The
decrease is mainly related to the sale of the shares in BH Domus
Pro UAB and BH Duetto UAB and the negative property
revaluation.
Net Asset Value (NAV)At the end
of 2023, the Fund’s NAV was EUR 109.5 million (31 December 2022:
EUR 133.7 million). Compared to the year-end 2022, the Fund’s NAV
decreased by 18.0%. The operational performance result was offset
by the EUR 21.9 million loss on property valuations and EUR 4.0
million loss from the disposal of the BH Domus Pro UAB and BH
Duetto UAB shares. These were the main factors behind the fall in
the Fund’s NAV. Excluding the impact of valuations, the NAV at the
end of 2023 would have been EUR 131.4 million or EUR 1.098 per
unit. As of 31 December 2023, IFRS NAV per unit decreased to EUR
0.9156 (31 December 2022: EUR 1.1172), while EPRA net tangible
assets and EPRA net reinstatement value were EUR 0.9546 per unit
(31 December 2022: EUR 1.1865). EPRA net disposal value was EUR
0.9122 per unit (31 December 2022: EUR 1.1143).
Interest-bearing loans and
bonds As of 31 December 2023 interest-bearing loans and
bonds (excluding lease liabilities) were EUR 143.5 million (31
December 2022: EUR 194.6 million). Outstanding bank loans decreased
due to the repayment of the Domus Pro and Duetto loans, part of
Europa and Kontor SIA loans and regular bank loan amortisation.
Also, the Fund redeemed a part of the bonds in the amount of EUR
7.5 million on 1 August 2023. The redemption was accompanied by the
reduction of the nominal value of the bonds to EUR 82,142.85 per
bond. The total nominal amount of the bonds before the redemption
was EUR 42,000,000 and after the redemption is EUR
34,499,997. Annual loan amortisation accounted for 1.4% of total
debt outstanding.
Cash flowCash inflow from core
operating activities in 2023 amounted to EUR 10.8 million (2022:
cash inflow of EUR 15.3 million). Cash inflow from investing
activities was EUR 20.4 million (2022: cash outflow of EUR
9.7 million) due to the sale of the shares in BH Domus Pro UAB and
BH Duetto UAB. Cash outflow from financing activities was EUR 30.4
million (2022: cash outflow of EUR 16.4 million). In 2023, the Fund
redeemed and issued bonds, repaid the Domus Pro and part of the
Europa loan, and paid regular interest on bank loans and bonds. In
March 2023, the Fund repaid the Domus Pro loan (EUR 11.0 million)
and EUR 6.0 million of the Europa loan using the proceeds from the
sale of the shares in BH Domus Pro UAB. In May the Fund redeemed
its EUR 50 million unsecured 5-year bond issue, completed a private
placement of 5-year bonds and issued bonds in the total volume of
EUR 42 million. In August the Fund early redeemed a part of the
bonds in the amount of EUR 7.5 million. During August, the Fund
successfully refinanced the Kontor SIA loan until 2028, reducing
the original Kontor SIA loan by EUR 1.2 million. At the end of
2023, the Fund’s consolidated cash and cash equivalents amounted to
EUR 6.2 million (31 December 2022: EUR 5.3 million).
Key earnings figures
EUR ‘000 |
2023 |
2022 |
Change (%) |
Net rental income |
14,617 |
17,430 |
(16.1%) |
Administrative expenses |
(2,617) |
(3,133) |
(16.5%) |
Losses on disposal of investment
properties |
(4,047) |
(423) |
(856.7%) |
Valuation losses on investment
properties |
(21,876) |
(2,914) |
(650.7%) |
Operating (loss)
profit |
(13,879) |
11,238 |
(223.5%) |
Net financial expenses |
(9,750) |
(6,311) |
(54.5%) |
(Loss) profit before
tax |
(23,629) |
4,927 |
(579.6%) |
Income
tax |
656 |
(983) |
166.7% |
Net (loss) profit for the period |
(22,973) |
3,944 |
(682.5%) |
|
|
|
|
Weighted average number of units
outstanding (units) |
119,635,429 |
119,635,429 |
- |
Earnings per unit (EUR) |
(0.19) |
0.03 |
- |
Key financial position
figures
EUR ‘000 |
31.12.2023 |
31.12.2022 |
Change (%) |
Investment properties in use |
250,385 |
333,123 |
(24.8%) |
Gross asset value
(GAV) |
261,138 |
343,963 |
(24.1%) |
|
|
|
|
Interest-bearing loans and bonds |
143,742 |
194 569 |
(26.3%) |
Total liabilities |
151,606 |
210,308 |
(27.9%) |
|
|
|
|
IFRS Net asset value (IFRS
NAV) |
109,532 |
133,655 |
(18.0%) |
EPRA Net Reinstatement Value (EPRA NRV) |
114,205 |
141,943 |
(19.5%) |
|
|
|
|
Number of units outstanding (units) |
119,635,429 |
119,635,429 |
- |
IFRS Net asset value (IFRS NAV)
per unit (EUR) |
0.9156 |
1.1172 |
(18.0%) |
EPRA Net Reinstatement Value (EPRA NRV) per unit
(EUR) |
0.9546 |
1.1865 |
(19.5%) |
|
|
|
|
Loan-to-Value ratio (%) |
57.3% |
58.4% |
- |
Average
effective interest rate (%) |
5.2% |
3.0% |
- |
During 2023, the average actual occupancy of the
portfolio was 83.7% (2022: 92.1%). The occupancy rate as of 31
December 2023 was 81.1% (31 December 2022: 90.5%). The decrease in
occupancy rate over the year was mostly influenced by the expiry of
the agreement with the main tenant in Upmalas Biroji BC and
EMERGN's decision to reduce their rented area in LNK Centre. The
Fund has successfully managed to sign a long-term lease for 4,128
sq. m in the renowned Upmalas Biroji building with the anchor
tenant Latvian State Police, which partially filled the space
vacated by SEB in August 2023. Some new lease agreements were also
signed in the Meraki office building in Q4 2023 and Q1 2024 for a
total area of approx. 5,102 sq. m.
As part of its strategy for the development of
existing properties, the Fund has chosen new partners to manage its
office and retail properties in Latvia. The management team
believes that this change will speed up the leasing process in
Latvia.
Overview of the Fund’s investment
properties as of 31 December 2023
Property
name |
Sector |
Fair value1 |
NLA |
Direct property yield |
Net initial yield |
Occupancy rate |
(EUR ‘000) |
(sq. m) |
20232 |
20233 |
Vilnius,
Lithuania |
|
|
|
|
|
|
Europa SC |
Retail |
36,437 |
17,047 |
3.8% |
4.2% |
84.5% |
North Star |
Office |
20,028 |
10,579 |
7.1% |
7.2% |
99.7% |
Meraki |
Office |
16,340 |
8,162 |
0.3% |
0.4% |
47.7% |
Total Vilnius |
|
72,805 |
35,788 |
4.4% |
4.6% |
80.6% |
Riga, Latvia |
|
|
|
|
|
|
Upmalas Biroji BC |
Office |
20,478 |
11,212 |
5.5% |
6.4% |
57.7% |
Vainodes I |
Office |
16,710 |
8,128 |
6.6% |
8.2% |
100.0% |
LNK Centre |
Office |
13,960 |
7,450 |
4.7% |
5.0% |
42.8% |
Sky SC |
Retail |
5,660 |
3,259 |
8.2% |
7.5% |
100.0% |
Galerija Centrs |
Retail |
64,592 |
19,306 |
2.8% |
3.2% |
80.4% |
Total Riga |
|
121,400 |
49,355 |
4.2% |
4.8% |
74.1% |
Tallinn, Estonia |
|
|
|
|
|
|
Postimaja & CC Plaza complex |
Retail |
19,810 |
9,232 |
3.7% |
5.5% |
95.6% |
Postimaja & CC Plaza complex |
Leisure |
13,240 |
9,139 |
6.7% |
6.1% |
94.3% |
Lincona |
Office |
14,370 |
10,775 |
6.6% |
7.3% |
83.5% |
Pirita
SC |
Retail |
8,760 |
5,425 |
6.1% |
8.6% |
97.1% |
Total Tallinn |
|
56,180 |
34,571 |
5.2% |
6.5% |
91.7% |
Total portfolio |
|
250,385 |
119,714 |
4.5% |
5.1% |
81.1% |
- Based on the latest valuation as of 31 December 2023 and
recognised right-of-use assets.
- Direct property yield (DPY) is calculated by dividing
annualized NOI by the acquisition value and subsequent capital
expenditure of the property.
- 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 |
|
|
2023 |
2022 |
Rental income |
17,743 |
20,482 |
Service charge income |
6,008 |
5,974 |
Cost of rental activities |
(9,134) |
(9,026) |
Net rental income |
14,617 |
17,430 |
|
|
|
Administrative expenses |
(2,617) |
(3,133) |
Other operating income |
44 |
278 |
Losses on disposal of investment properties |
(4,047) |
(423) |
Valuation losses on investment properties |
(21,876) |
(2,914) |
Operating profit (loss) |
(13,879) |
11,238 |
|
|
|
Financial income |
104 |
1 |
Financial expenses |
(9,854) |
(6,312) |
Net financial expenses |
(9,750) |
(6,311) |
|
|
|
Profit (loss) before tax |
(23,629) |
4,927 |
Income tax charge |
656 |
(983) |
Profit (loss) for the period |
(22,973) |
3,944 |
|
|
Other comprehensive income that
is or may be reclassified to profit or loss in subsequent
periods |
Net
gain (loss) on cash flow hedges |
(1,273) |
2,746 |
Income tax relating to net gain (loss) on cash flow hedges |
123 |
(236) |
Other comprehensive income (expense), net of tax, that is
or may be reclassified to profit or loss in subsequent
periods |
(1,150) |
2,510 |
|
|
|
Total comprehensive income (expense) for the period, net of
tax |
(24,123) |
6,454 |
|
|
|
Basic and diluted earnings per unit (EUR) |
(0.19) |
0.03 |
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
EUR ‘000 |
|
31.12.2023 |
31.12.2022 |
Non-current assets |
|
|
|
Investment properties |
|
250,385 |
333,123 |
Intangible assets |
|
11 |
6 |
Property, plant and equipment |
|
4 |
1 |
Derivative financial instruments |
|
295 |
2,228 |
Other non-current assets |
|
647 |
- |
Total non-current assets |
|
251,342 |
335,358 |
|
|
|
|
Current assets |
|
|
|
Trade and other receivables |
|
2,591 |
2,693 |
Prepayments |
|
402 |
273 |
Derivative financial instruments |
|
621 |
292 |
Cash and cash equivalents |
|
6,182 |
5,347 |
Total current assets |
|
9,796 |
8,605 |
Total assets |
|
261,138 |
343,963 |
|
|
|
|
Equity |
|
|
|
Paid in capital |
|
145,200 |
145,200 |
Cash flow hedge reserve |
|
531 |
1,681 |
Retained earnings |
|
(36,199) |
(13,226) |
Total equity |
|
109,532 |
133,655 |
|
|
|
|
Non-current liabilities |
|
|
|
Interest-bearing loans and borrowings |
|
64,158 |
124,017 |
Deferred tax liabilities |
|
2,774 |
7,490 |
Other non-current liabilities |
|
1,079 |
1,240 |
Total non-current liabilities |
|
68,011 |
132,747 |
|
|
|
|
Current liabilities |
|
|
|
Interest-bearing loans and borrowings |
|
79,584 |
71,094 |
Trade and other payables |
|
3,343 |
5,644 |
Income tax payable |
|
6 |
10 |
Other current liabilities |
|
662 |
813 |
Total current liabilities |
|
83,595 |
77,561 |
Total liabilities |
|
151,606 |
210,308 |
Total equity and liabilities |
|
261,138 |
343,963 |
For more information, please
contact:
Tarmo KarotamBaltic Horizon Fund managerE-mail
tarmo.karotam@nh-cap.comwww.baltichorizon.com
The Fund is a registered contractual public
closed-end real estate fund that is managed by Alternative
Investment Fund Manager license holder Northern Horizon Capital AS.
Both the Fund and the Management Company are supervised by the
Estonian Financial Supervision Authority.
To receive Nasdaq announcements and news from
Baltic Horizon Fund about its projects, plans and more, register on
www.baltichorizon.com. You can also follow Baltic Horizon Fund
on www.baltichorizon.com and on LinkedIn, Facebook, X and
YouTube.
This announcement contains information that the
Management Company is obliged to disclose pursuant to the EU Market
Abuse Regulation. The information was submitted for publication,
through the agency of the above distributors, at 11:35 EET on 29
March 2024.
- Baltic_Horizon_Fund_2023-12-31_EN_audited
- BHF Annual Report_2023_EN (1)