The performance of EfTEN Real Estate Fund for the first half of 2024 meets the fund manager’s expectations. Vacancy rates remain below 3% of total leasable area, which is an excellent result considering the overall business environment. Excluding the payment difficulties related to the tenant in Hortese properties, the payment behavior of clients is good, and the level of arrears remains low. The fund manager considers the issues related to Hortese properties as isolated cases specific to the tenant and not indicative of a broader deterioration. The fund manager has already begun to seek new solutions for both Hortes stores.
Currently, the highest vacancy rates are in the office sector, accounting for 76% of the total portfolio vacancy. However, this is spread across ten different office buildings, and new tenants are continually being added. The weaker demand for office space is a clear trend globally and is noticeable in every Baltic capital. More broadly, the downward trend in interest rates in the second half of 2024 is expected to increase transaction activity, which will help to grow the fair value of EfTEN Real Estate Fund AS’s conservatively priced portfolio.
EfTEN Real Estate Fund AS consolidated sales income for the second quarter of 2024 was 7.957 million euros (2023 II quarter: 7.961 million euros). The consolidated sales revenue of EfTEN Real Estate Fund AS for the first half of 2024 was 15.918 million euros (2023 first half: 15.749 million euros). The group’s net rental income totalled 14.781 million euros in the first half of 2024 (2023: 14.704 million euros). The net profit of the group in the same period was 6.250 million euros (2023: 2.445 million euros).
The consolidated net rental income margin was 93% (2023: 93%), in the first half of 2024, so costs directly related to property management (including land tax, insurance, maintenance and improvement costs) and distribution costs constituted 7% (2023: 7%) of sales revenue.
The volume of the Group’s assets as at 30.06.2024 was 376.332 million euros (31.12.2023: 380.944 million euros), including the fair value of real estate investments made up 96% of the volume of asset (31.12.2023: 94%).
Investment portfolio
As of the end of June 2024 the Group has 35 (31.12.2023: same) commercial investment properties with a fair value as at the balance sheet date of 361.391 million euros (31.12.2023: 357.916 million euros) and the acquisition cost of 359.405 million euros (31.12.2023: 354.408 million euros). In addition, the Group’s joint venture owns the Palace hotel in Tallinn, the fair value of which as of 30.06.2024 was 8.540 million euros (31.12.2023: 9.0 million euros).
In the first 6 months of 2024, the group earned a total of 15.342 million euros in rental income, which is 1% more than in the same period of 2023.
The vacancy of investment portfolio was 2.9% as of 30.06.2024 (31.12.2023: 2.6%). The highest vacancy is in the office segment (12.4%), where it takes longer than before to fill vacant rental premises.
EfTEN Real Estate Fund AS regularly evaluates investment properties twice a year – in June and December. In June 2024, the fair value of the Fund’s investment properties decreased by 0.4% (by EUR 1.454 million) as a result of revaluations, including the value of office sector assets decreased by 1.3%, the value of logistics sector assets increased by 0.7%, and the value of commercial sector assets decreased by 0.7%. The portfolio’s downward valuation is largely related to a more conservative cash flow forecast, especially in the office segment.
Financing
During the first 6 months of 2024, the Fund’s subsidiaries EfTEN Autokeskus OÜ and EfTEN Jurkalne SIA extended their loan agreements. Within the next 12 months, the loan agreement of one of the Group’s subsidiaries will expire, the balance of which is 2,196 thousand euros as of 30.06.2024. The LTV of the expiring loan agreement is 30.6%, and the investment property has a stable and strong rental cash flow, therefore, according to the management of the Group, there will be no obstacles to the extension of the loan agreement.
The weighted average interest rate of the Group’s loan agreements is 5.65% as of 30.06.2024 (31.12.2023: 5.91) and the LTV (Loan to Value) is 42% (31.12.2023: 42%). All loan agreements of the fund’s subsidiaries are linked to a floating interest rate.
Information on shares
The net value of the share of EfTEN Real Estate Fund AS as of 30.06.2024 was 19.79 euros (31.12.2023: 20.21 euros). The net value of EfTEN Real Estate Fund AS shares decreased by 2% in the first half of 2024. In April 2024, the fund distributed dividends in the total amount of 10.82 million euros. Without profit distribution, the net value of EfTEN Real Estate AS shares would have increased by 3.5% in the first half of the year.
As of 30.06.2024, the Fund has 10,819,796 shares.
CONSOLIDATED STATEMEMT OF COMPREHENSIVE INCOME
| II quarter | 1st half-year | |||
| 2024 | 2023 | 2024 | 2023 | |
| € thousands | ||||
| Revenue | 7,957 | 7,961 | 15,918 | 15,749 |
| Cost of services sold | -341 | -363 | -759 | -757 |
| Gross profit | 7,616 | 7,598 | 15,159 | 14,992 |
| Marketing costs | -178 | -192 | -378 | -288 |
| General and administrative expenses | -880 | -860 | -1,819 | -1,727 |
| Profit / loss from the change in the fair value of investment property | -1,454 | -6,182 | -1,454 | -6,182 |
| Other operating income and expense | 44 | 3 | 86 | 13 |
| Operating profit | 5,148 | 367 | 11,594 | 6,808 |
| Profit / loss from joint ventures | -204 | -100 | -254 | -109 |
| Interest income | 64 | 14 | 165 | 20 |
| Other finance income and expense | -2,238 | -1,987 | -4,473 | -3,537 |
| Profit before income tax | 2,770 | -1,706 | 7,032 | 3,182 |
| Income tax expense | -328 | -483 | -782 | -737 |
| Net profit for the reporting period | 2,442 | -2,189 | 6,250 | 2,445 |
| Total consolidated profit for the reporting period | 2,442 | -2,189 | 6,250 | 2,445 |
| Earnings per share | ||||
| – basic | 0.23 | -0.20 | 0.58 | 0.23 |
| – diluted | 0.23 | -0.20 | 0.58 | 0.23 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| 30.06.2024 | 31.12.2023 | |
| € thousands | ||
| ASSETS | ||
| Cash and cash equivalents | 10,772 | 14,712 |
| Current deposits | 50 | 3,400 |
| Receivables and accrued income | 1,555 | 2,360 |
| Prepaid expenses | 133 | 106 |
| Total current assets | 12,510 | 20,578 |
| Long-term receivables | 409 | 214 |
| Shares in joint ventures | 1,824 | 2,078 |
| Investment property | 361,391 | 357,916 |
| Property, plant, and equipment | 198 | 158 |
| Total non-current assets | 363,822 | 360,366 |
| TOTAL ASSETS | 376,332 | 380,944 |
| LIABILITIES AND EQUITY | ||
| Borrowings | 8,758 | 16,907 |
| Payables and prepayments | 2,255 | 3,417 |
| Total current liabilities | 11,013 | 20,324 |
| Borrowings | 140,618 | 130,849 |
| Other non-current liabilities | 1,892 | 1,790 |
| Deferred income tax liability | 8,681 | 9,283 |
| Total non-current liabilities | 151,191 | 141,922 |
| Total liabilities | 162,204 | 162,246 |
| Share capital | 108,198 | 108,198 |
| Share premium | 84,721 | 84,721 |
| Statutory reserve capital | 2,799 | 2,749 |
| Retained earnings | 18,410 | 23,030 |
| TOTAL EQUITY | 214,128 | 218,698 |
| TOTAL LIABILITIES AND EQUITY | 376,332 | 380,944 |
