Management Board of Northern Horizon Capital AS has approved the unaudited financial results of Baltic Horizon Fund (the Fund) for the twelve months of 2024.
Our strategic ambitions
In 2024, the Fund’s management team made the strategic decision to implement key performance indicators (KPIs) as a means to effectively measure and track performance. This decision stems from the recognition that clear and measurable benchmarks are essential for evaluating progress towards the Fund’s objectives. By defining specific KPIs, the team aims to enhance transparency, accountability, and facilitate decision-making processes.
The focus of the Fund management team is and will be on these major objectives:
- Portfolio occupancy of at least 95% by end of June 2025;
- Loan-to-Value target at 50% or lower;
- 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.
As we recap our goals for 2024, we can report the following achievements:
We have successfully achieved 100% portfolio certification.
Despite receiving a 3-star GRESB rating in 2024, we have thoroughly analysed the assessment results and developed an action plan to secure a 4-star GRESB rating in 2025.
Although we did not reach our target of 90% portfolio occupancy by the end of 2024, we made significant progress, achieving an 86.5% occupancy rate based on lease signing date.
We have recently announced our disposal strategy to reduce LTV level to the target level. Several disposal processes have already commenced as of February 2025, with the closing of transactions planned for later in the year.
Looking ahead to 2025, we will continue with the same solid strategy and goals that will stabilize the Fund’s financial position and maximize the potential of its portfolio.
Leasing performance
In a challenging environment characterized by increasing real estate market vacancies across all Baltic states in recent periods, the Fund also faced outflows of some tenants, however it has demonstrated its adaptability and the attractiveness of its properties by renewing a significant amount of existing leases and signing a substantial number of new leases in 2024. This success was primarily attributable to significant deals with prominent anchor tenants such as Narbutas in Meraki (3,200 sq. m) and Apollo Group in Coca-Cola Plaza (2,200 sq. m), International School of Riga in S27 (3,680 sq. m) and significant leases in Galerija Centrs signed with My Fitness (2,000 sq. m) and Expo GROUP (2,000 sq. m).
The Fund team has been diligently negotiating with current tenants to extend lease agreements, while also actively engaging with new tenants to fill the vacancies. These efforts have resulted in lease renewals of approximately 23,800 sq. m and a net lease inflow of approximately 4,800 sq. m
During 2024, the Fund signed new leases for 22,743 sq. m, securing an annual rental income of EUR 2,945 thousand for future periods. Furthermore, 61 new tenants have been attracted to our buildings, while 69 existing tenants have decided to continue their cooperation with us.
By the end of December 2024, the occupancy of the portfolio increased to 82.1%. Calculating based on the lease signing date, the occupancy already exceeds 86%. Signed premises will be handed over to tenants in 2025.
Notably, less than 20% of the leases are set to expire during 2025, while the vast majority expire in 2026 and later. We aim to spread our lease terms evenly so that no more than 20% of our leases expire each year. Recent successful leasing activity is reflected in the increase in the weighted average unexpired lease term until the first break option, which was 3.3 years as of 31 December 2024 (compared to 2.9 years as of 31 December 2023).
Outlook
In 2025 the Fund will focus on flexible and sustainable solutions to meet tenant demands and market conditions.
Our key goals are increasing the occupancy of the portfolio and decreasing the LTV by way of repaying part of the bonds.
In 2025, the Baltic commercial real estate market is anticipated to navigate both considerable challenges and emerging opportunities. Persisting economic uncertainty is expected to keep demand for commercial spaces subdued. Key factors influencing this trend include evolving consumer preferences, the continued expansion of e-commerce, and the sustained shift toward remote work, all of which are reshaping the need for office and retail properties.
While economic forecasts cautiously suggest potential market stabilization in the coming year, a rapid recovery remains unlikely due to geopolitical uncertainties and evolving tenant and consumer needs. Recognizing these challenges, the Fund’s management strives to enhance financial stability by reducing leverage through partial bond repayment. This strategy aims to alleviate financial pressure, positioning the Fund for more sustainable financial performance.
As part of this initiative, the Fund has announced a strategic plan to divest select assets, with the objective of reducing the LTV ratio to below 50% and fostering a more stable recovery. Up to three assets have been identified for potential disposal based on their life cycle, optimization potential, and alignment with the Fund’s long-term strategy. Among these, the Postimaja and CC Plaza complex in Tallinn has been introduced to the market, following the Fund’s successful achievement of 100% occupancy and WALT exceeding five years. Given limited opportunities for further value enhancement beyond its development potential—an avenue the Fund does not intend to pursue in the short term—the asset has been prioritized for sale. To facilitate the divestment process, the Fund has engaged Newsec Advisers UAB and Redgate Capital AS as financial advisors. The sales process was commenced in February, with the aim of closing later in the year.
As of the date of release of this report, the Fund has a Letter of Intent (LOI) with a potential buyer and DD is in progress with Meraki property. According to LOI, the transaction would be finalized in spring 2025. At the end of 2024, the property had an occupancy of 86% and WAULT of 4.3 years. Due to anticipated vacancies in the office sector and an increasing supply, the Fund has decided not to proceed with the development of a second tower, for which the permit remains valid. The current market conditions, characterized by recovering investor activity, present an improved opportunity to sell the property. Potential buyers have also shown preliminary interest in Lincona and Pirita Center.
If the divestment plan proceeds as anticipated, the Fund will be positioned to repay a significant portion of its bonds while continuing to invest in its remaining property portfolio. This will enable the Fund to concentrate on its core assets in alignment with its strategic objectives, providing a solid foundation for future growth.
To achieve our goal of increasing portfolio occupancy, we are adapting to the evolving needs of our tenants and customers. The rise of e-commerce and online shopping has transformed the traditional concept of shopping centres. Visitors now seek not only to try on and purchase goods but also to enjoy entertainment and experiences.
This trend is evident in the success of our food courts, such as Burzma and Dialogai, as well as the interactive exhibition Kosmopark, which attracted a significant number of visitors in Europa and now operates in Galerija Centrs. Following this success, we have signed a new 3-year lease with an entertainment operator to open a Danger Park on the second floor of Europa shopping centre in May 2025. We are also considering various entertainment concepts for Galerija Centrs. Additionally, we will continue to offer the community a variety of events and temporary pop-ups in both shopping centres.
In line with our strategic goal to increase occupancy, we are reviewing the concept in Europa and seeking the best tenant mix. We are currently negotiating a lease with a 700 sq m. anchor fashion leader and have advanced discussions with several coworking operators who find the shopping centre and its location ideal for their concept, one of them has already signed a LOI for 1,300 sq m. We believe that the combination of entertainment and a wide range of catering options, which will expand from the food court to a newly planned restaurant zone on the first floor facing Konstitucijos Avenue, along with strategic changes to the tenant mix on the second and third floors, will maximize visitor flow and fully exploit the potential of the shopping centre.
While the traditional shopping centre concept remains effective for Galerija, as evidenced by increasing foot flow and turnover, we are exploring additional concepts for currently vacant premises to complement our existing tenants and expand the range of services offered to visitors.
Office tenants are currently looking not just for a place to work during the day, but rather for hybrid working spaces or built-to-suit solutions with increased expectation over ESG, workplace wellbeing features and easily reachable services, which become increasingly important. During the last year, we witnessed a higher demand for mixed-use projects that combine commercial spaces with services, including catering, medical clinics and fitness centres. We believe, that in the upcoming years demand for such concepts will grow further and will add value to the properties.
We continue to adapt to market demands by diversifying our office tenant mix beyond traditional occupiers, integrating catering operators, medical clinics, and even kindergartens into our office buildings. This approach not only enhances tenant diversification but also meets the needs of both our customers and the surrounding communities.
In the office sector, our primary challenge and focus in 2025 will be addressing the remaining vacancies in S27 and Upmalas. A significant milestone in 2024 was securing a lease agreement for approximately 3,680 sq. m. in S27 with the International School of Riga, a leading provider of international education serving students from preschool through high school, set to open at the end of 2025. Even in the current market conditions we are confident that the International School of Riga coming into the building together with the renovation and improvements that are being done will enable us to attract new tenant segments that recognise the value of synergy.
Our commitment to supporting existing and prospective tenants, along with our ability to tailor office spaces to individual requirements, positions us well to lease the remaining areas in North Star and Meraki in the coming quarters.
Our investments in green energy projects remain a key priority, and from Q1 2025, all our properties in Latvia and Lithuania will transition to using energy from remote solar panels. In Estonia, we are actively exploring solutions in our properties to reduce the reliance to gas. Additionally, we are evaluating new technologies and sustainability initiatives that align with our ESG strategy while enhancing energy efficiency, optimizing property performance, and reducing operational costs.
Simultaneously, to reinforce its financial position, the Fund is committed to improving its debt service ratio and reducing loan-to-value levels. By focusing on increasing occupancy rates and optimizing property concepts, we aim to enhance asset performance and maximize net operating income. Adaptive leasing strategies, property repositioning, and targeted investments in high-demand segments will remain key priorities. These initiatives are designed to create long-term value for investors while ensuring the Fund remains resilient in a dynamic market environment.
Baltic Horizon achieves a 100% BREEAM certified portfolio
In 2025, we will continue advancing our social and environmental commitments. All our assets have been BREEAM-certified, and by the end of 2024, we achieved 98% green leases across our portfolio, with a target to further increase this share in the coming year.
GRESB benchmarking
Recently, we announced a 3-star GRESB rating of 80 points, falling 1.5 points short of the 4-star threshold. This decline, compared to previous years, reflects increasing industry-wide commitments, heightened requirements, and evolving best practices. The management team has conducted a thorough analysis of the assessment results and developed an action plan aimed at restoring the Fund’s 4-star rating in 2025.
Net result and net rental income
In 2024, the Group recorded a net loss of EUR 16.8 million compared with a net loss of EUR 23.0 million for 2023. The result was mainly driven by the property valuation loss. Earnings per unit for 2024 were negative at EUR 0.13 (2023: negative at EUR 0.19).
The Group earned consolidated net rental income of EUR 11.6 million in 2024 (2023: 14.6 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.
On an EPRA like-for-like basis, the portfolio net rental income in 2024 was 11.8% lower than in 2023, 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 100% vacancy of S27, as well as lower rental income in Europa due to the new anchor tenant IKI equipping the premises and opening in March.
Portfolio properties in the retail segment contributed 53.3% (like-for-like 2023: 43.6%) of net rental income in 2024, followed by the office segment with 41.7% (like-for-like 2023: 50.9%) and the leisure segment with 5.0% (2023: 5.5%).
Retail assets located in the central business districts (Postimaja, Europa and Galerija Centrs) accounted for 42.2% of total portfolio net rental income in 2024. Total net rental income attributable to neighbourhood shopping centres was 11.1% in 2024.
In 2024, investment properties in Latvia and Lithuania contributed 44.4% (like-for-like 2023: 41.8%) and 22.8% (like-for-like 2023: 31.1%) of net rental income, respectively, while investment properties in Estonia contributed 32.8% (like-for-like 2023: 27.1%).
Investment properties
At the end of Q4 2024, 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 241.2 million at the end of December 2024 (31 December 2023: EUR 250.4 million) and incorporated a total net leasable area of 118.3 thousand sq. m. The change in portfolio value was mainly driven by the changes in exit yields and upward adjustments of the weighted average cost of capital (WACC). During 2024 the Group invested approximately EUR 6.0 million in tenant fit-outs.
Gross Asset Value (GAV)
As of 31 December 2024, the Fund’s GAV was EUR 256.0 million (31 December 2023: EUR 261.1 million). The decrease compared to the prior year was mainly related to the negative revaluation of the Fund’s investment properties of approx. EUR 9.5 million and was partly offset by the private placement of new units which took place in September and resulted in a cash increase of approx. EUR 6.29 million.
Net Asset Value (NAV)
As of 31 December 2024, the Fund’s NAV was EUR 98.1 million (31 December 2023: EUR 109.5 million). The NAV decrease was mainly due to the revaluation of investment properties. At the end of September 2024 new units were issued resulting in approx. EUR 6.29 million of new equity. As of 31 December 2024, IFRS NAV per unit amounted to EUR 0.6833 (31 December 2023: EUR 0.9156), while EPRA net tangible assets and EPRA net reinstatement value were EUR 0.7267 per unit (31 December 2023: EUR 0.9546). EPRA net disposal value was EUR 0.6797 per unit (31 December 2023: EUR 0.9122).
Interest-bearing loans and bonds
As of 31 December 2024, interest-bearing loans and bonds (excluding lease liabilities) were EUR 149.0 million (31 December 2023: EUR 143.5 million). Annual loan amortisation accounted for 1.5% of total debt outstanding. In July 2024, the Fund successfully signed the Meraki loan with Bigbank for a total amount of EUR 10.3 million. A major part of the loan was used to repay short term bonds in the amount of EUR 8.0 million maturing in July 2024.
As of 31 December 2024, the Fund’s consolidated cash and cash equivalents amounted to EUR 10.1 million (31 December 2023: EUR 6.2 million).
Cash flow
Cash inflow from core operating activities in 2024 amounted to EUR 9.9 million (2023: cash inflow of EUR 11.4 million). Cash inflow from core operating activities decreased mainly due to the sale of Duetto and Domus Pro properties in H1 2023 and higher vacancies, mostly in S27 and Upmalas Biroji. Cash outflow from investing activities was EUR 7.0 million due to investments in existing properties and transaction costs (2023: cash inflow of EUR 19.9 million due to sales of assets). Cash inflow from financing activities was EUR 1.0 million (2023: cash outflow of EUR 30.5 million). In Q4 2024, the Fund prepaid loans in the amount of EUR 2.7 million and paid regular amortisation and interest on bank loans and bonds.
Key earnings figures
| EUR ‘000 | Q1-Q4 2024 | Q1-Q4 2023 | Change (%) |
| Net rental income | 11,588 | 14,617 | (20.7%) |
| Administrative expenses | (2,373) | (2,617) | (9.3%) |
| Net other operating income | 18 | 44 | (59.1%) |
| Losses on disposal of investment properties | (863) | (4,047) | (78.7%) |
| Valuation gains (losses) on investment properties | (15,581) | (21,876) | (28.8%) |
| Operating profit (loss) | (7,211) | (13,879) | (48.0%) |
| Net financial expenses | (10,344) | (9,750) | 6.1% |
| Profit (loss) before tax | (17,555) | (23,629) | (25.7%) |
| Income tax | 774 | 656 | 18.0% |
| Net profit (loss) for the period | (16,781) | (22,973) | (27.0%) |
| Weighted average number of units outstanding (units) | 143,562,514 | 119,635,429 | 20.0% |
| Earnings per unit (EUR) | (0.12) | (0.19) | (39.1%) |
Key financial position figures
| EUR ‘000 | 31.12.2024 | 31.12.2023 | Change (%) |
| Investment properties | 241,158 | 250,385 | (3.7%) |
| Gross asset value (GAV) | 256,048 | 261,138 | (1.9%) |
| Interest-bearing loans and bonds | 148,989 | 143,487 | 3.8% |
| Total liabilities | 157,953 | 151,606 | 4.2% |
| IFRS NAV | 98,095 | 109,532 | (10.4%) |
| EPRA NRV | 104,333 | 114,205 | (8.6%) |
| Number of units outstanding (units) | 143,562,514 | 119,635,429 | 20.0% |
| IFRS NAV per unit (EUR) | 0.6833 | 0.9156 | (25.4%) |
| EPRA NRV per unit (EUR) | 0.7267 | 0.9546 | (23.9%) |
| Loan-to-Value ratio (%) | 61.8% | 57.3% | – |
| Average effective interest rate (%) | 6.7% | 5.2% | – |
During Q4 2024, the average actual occupancy of the portfolio was 81.0% (Q3 2024: 80.1%). The occupancy rate increased to 82.1% as of 31 December 2024 (30 September 2024: 80.5%).
Overview of the Fund’s investment properties as of 31 December 2024
| Property name | Sector | Fair value1 | NLA | Direct property yield | Net initial yield | Occupancy rate |
| (EUR ‘000) | (sq. m) | 20242 | 20243 | |||
| Vilnius, Lithuania | ||||||
| Europa SC | Retail | 35,946 | 17,092 | 2.3% | 2.8% | 80.6% |
| North Star | Office | 19,548 | 10,734 | 6.5% | 7.0% | 91.8% |
| Meraki | Office | 16,3804 | 7,833 | 1.2% | 1.5% | 86.3% |
| Total Vilnius | 71,874 | 35,659 | 3.0% | 3.6% | 85.2% | |
| Riga, Latvia | ||||||
| Upmalas Biroji BC | Office | 19,224 | 11,203 | 3.7% | 4.2% | 64.1% |
| Vainodes I | Office | 15,900 | 8,128 | 8.8% | 8.8% | 100.0% |
| S27 | Office | 11,360 | 7,303 | (0.6%) | (0.9%) | – |
| Sky SC | Retail | 4,900 | 3,260 | 8.6% | 8.5% | 100.0% |
| Galerija Centrs | Retail | 60,020 | 19,423 | 3.2% | 4.1% | 84.7% |
| Total Riga | 111,404 | 49,317 | 3.7% | 4.5% | 71.0% | |
| Tallinn, Estonia | ||||||
| Postimaja & CC Plaza complex | Retail | 21,800 | 9,232 | 3.7% | 6.7% | 100.0% |
| Postimaja & CC Plaza complex | Leisure | 13,190 | 7,869 | 4.8% | 4.3% | 97.7% |
| Lincona | Office | 13,100 | 10,767 | 6.4% | 7.4% | 88.5% |
| Pirita SC | Retail | 9,790 | 5,425 | 6.7% | 9.2% | 97.1% |
| Total Tallinn | 57,880 | 33,293 | 4.9% | 6.7% | 95.3% | |
| Total active portfolio | 241,158 | 118,269 | 3.8% | 4.7% | 82.1% |
- Based on the latest valuation as of 31 December 2024 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.
- Meraki value measured at disposal price. Market value according to independent property valuators Newsec is EUR 17,490,000.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
| EUR ‘000 | 01.10.2024 | 01.10.2023 | 01.01.2024 | 01.01.2023 | ||
| – 31.12.2024 | – 31.12.2023 | – 31.12.2024 | – 31.12.2023 | |||
| Rental income | 3,779 | 3,755 | 15,136 | 17,743 | ||
| Service charge income | 1,145 | 1,487 | 4,744 | 6,008 | ||
| Cost of rental activities | (2,205) | (2,348) | (8,292) | (9,134) | ||
| Net rental income | 2,719 | 2,894 | 11,588 | 14,617 | ||
| Administrative expenses | (644) | (631) | (2,373) | (2,617) | ||
| Other operating income (expenses) | 3 | 29 | 18 | 44 | ||
| Losses on disposal of investment properties | (245) | (237) | (863) | (4,047) | ||
| Valuation losses on investment properties | (3,052) | (7,250) | (15,581) | (21,876) | ||
| Operating profit (loss) | (1,219) | (5,195) | (7,211) | (13,879) | ||
| Financial income | 169 | 29 | 196 | 104 | ||
| Financial expenses | (2,789) | (2,538) | (10,540) | (9,854) | ||
| Net financial expenses | (2,620) | (2,509) | (10,344) | (9,750) | ||
| Profit (loss) before tax | (3,839) | (7,704) | (17,555) | (23,629) | ||
| Income tax charge | 457 | (53) | 774 | 656 | ||
| Profit (loss) for the period | (3,382) | (7,757) | (16,781) | (22,973) | ||
| Other comprehensive income that is or may be reclassified to profit or loss in subsequent periods | ||||||
| Net gain (loss) on cash flow hedges | (446) | (759) | (1,003) | (1,273) | ||
| Income tax relating to net gain (loss) on cash flow hedges | 1 | 64 | 52 | 123 | ||
| Other comprehensive income (expense), net of tax, that is or may be reclassified to profit or loss in subsequent periods | (445) | (695) | (951) | (1,150) | ||
| Total comprehensive income (expense) for the period, net of tax | (3,827) | (8,452) | (17,732) | (24,123) | ||
| Basic earnings per unit (EUR) | (0.02) | (0.06) | (0.13) | (0.19) | ||
| Diluted earnings per unit (EUR) | – | – | (0.12) | – | ||
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| EUR ‘000 | 31.12.2024 | 31.12.2023 |
| Non-current assets | ||
| Investment properties | 241,158 | 250,385 |
| Intangible assets | 4 | 11 |
| Property, plant and equipment | 5 | 4 |
| Derivative financial instruments | 1 | 295 |
| Other non-current assets | 1,225 | 647 |
| Total non-current assets | 242,393 | 251,342 |
| Current assets | ||
| Trade and other receivables | 2,800 | 2,591 |
| Prepayments | 802 | 402 |
| Derivative financial instruments | – | 621 |
| Cash and cash equivalents | 10,053 | 6,182 |
| Total current assets | 13,655 | 9,796 |
| Total assets | 256,048 | 261,138 |
| Equity | ||
| Paid in capital | 151,495 | 145,200 |
| Cash flow hedge reserve | (420) | 531 |
| Retained earnings | (52,980) | (36,199) |
| Total equity | 98,095 | 109,532 |
| Non-current liabilities | ||
| Interest-bearing loans and borrowings | 98,491 | 64,158 |
| Deferred tax liabilities | 1,898 | 2,774 |
| Other non-current liabilities | 1,446 | 1,079 |
| Total non-current liabilities | 101,835 | 68,011 |
| Current liabilities | ||
| Interest-bearing loans and borrowings | 50,736 | 79,584 |
| Trade and other payables | 4,473 | 3,343 |
| Income tax payable | 14 | 6 |
| Other current liabilities | 895 | 662 |
| Total current liabilities | 56,118 | 83,595 |
| Total liabilities | 157,953 | 151,606 |
| Total equity and liabilities | 256,048 | 261,138 |
