Published: 2020-04-24 07:10:00 CEST
EfTEN Real Estate Fund III
Company Announcement

EfTEN Real Estate Fund III AS unaudited results for 1st quarter 2020

The consolidated sales revenue of EfTEN Real Estate Fund III AS for the 1st quarter of 2020 was EUR 2.443 million eurot (1st quarter of 2019: EUR 2.315 million), which increased by 5.5% in a year. The Group's net rental revenue less finance costs for the 1st quarter of 2020 was EUR 1.929 million (1st quarter of 2019: EUR 1.815 million), which increased by 6.2% in a year. The Group's net profit for the same period amounted to EUR 1,368 million (2019: EUR 1.369 million). The relatively smaller increase in net profit compared to the increase in sales revenue and net rental income is related to higher general administrative expenses, which in the first quarter of 2020 included due diligence expenses of two new real estate investments in the amount of EUR 60 thousand.

The consolidated gross profit margin in the 1st quarter of 2020 was 96% (2019: 97%). Therefore, expenses directly related to management of properties (incl. land tax, insurance, maintenance and improvement costs) accounted for 4% (2019: 3%) of the revenue. The Group's expenses related to properties, marketing costs, general expenses, other income and expenses accounted for 24.2% of the revenue in the 1st quarter of 2020 (1st quarter of 2019: 19.5%).

In the first quarter of 2020, the Group has earned a free cash flow (EBITDA less loan payments and interest expenses) of EUR 0.873 million  (Q1 2019: EUR 0.934 million). The lower free cash flow this year is mainly due to provisions made in March in connection with the Covid-19 pandemic and the establishment of a state of emergency in Estonia, Latvia and Lithuania, one-off takeover costs and due diligence costs of two real estate investment companies acquired in 2020.

Due to the emergency situation caused by the Covid-19 pandemic and the decrease in potential rental income and deteriorating customer payment behavior from March 2020, the Group's management has requested payment leave for most real estate investment loan agreements for up to six months from March and April 2020. From March 2020, payment leave became effective for two investment properties, and the rest became effective after the balance sheet date, from April 2020. The monthly repayments under the loan agreements decrease by an average of 197 thousand euros per month during the Group's borrowings’ payment leave.

The weighted average interest rate of the Group's loan agreements (incl. taking into account interest rate swap agreements) as of the end of March is 2.0% (31.12.2019: 1.8%) and LTV (Loan to Value) 50% (31.12.2019: 52%)

On 10 January 2020, EfTEN Real Estate Fund III AS entered into debt purchase agreements for the acquisition of the owners of the Air Baltic head office at Riga Airport and Piepilsetas production and warehouse building in Kekava near Riga. The transactions were completed on March 12 and March 13, 2020. and the financial indicators of the two new subsidiaries have been consolidated line by line in the Group's financial statements since 1 March 2020. A total of EUR 8,873 thousand was paid for the subsidiaries, including loan receivables from the former owners in the amount of EUR 3,780 thousand.

At the end of March 2020, the Group had 13 (31.12.2019: 11) commercial investment properties with a fair value as at the balance sheet date of EUR 129.132 million (31.12.2019: EUR 113.011 million) and acquisition cost of EUR 117.869 million (31.12.2019: EUR 101.746 million).

EfTEN Real Estate Fund III AS evaluates its real estate investments twice a year - as of 31 December and 30 June. The main inputs to the fair value measurement of investment property are cash flow from investment property, vacancy forecasts, discount rate (WACC) and exit productivity. All changes in the lease agreements entered into by the Group companies in connection with the Covid-19 crisis are temporary (mainly 1-3 months, in some cases also up to 4 and 6 months), therefore the long-term cash flow is not affected by the current agreements. As of the preparation of the interim report, temporary lease agreements have been entered into to suspend or reduce the rent in the total amount of 204 thousand euros per month (25% of the usual monthly rental income). The change in discount rates and exit yields depends on both market and borrower interest rates, as well as the price levels of transactions in the real estate market, for which input information is provided by the Group's independent appraiser Colliers International. The next valuations of the Group's real estate investments will be performed in June 2020.

The net asset value of the share of EfTEN Real Estate Fund III AS at 31.03.2020 was EUR 17.18 (31.12.2019: EUR 16.85).The net value of the share of EfTEN Real Estate Fund III AS increased in the 1st quarter of 2020 1.9% (1st quarter of 2019: 2.7%).


 

 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

  1st quarter
EUR thousand 2020 2019
Revenue 2,443 2,315
Cost of services sold -88 -76
Gross profit 2,355 2,239
     
Marketing costs -93 -86
General and administrative expenses -414 -288
Other operating income and expense 5 -1
Operating profit 1,853 1,864
     
Finance costs -333 -338
Profit before income tax 1,520 1,526
     
Income tax expense -152 -157
Total comprehensive income for the financial period 1,368 1,369
Earnings per share    
  - Basic 0.32 0.42
  - Diluted 0.32 0.42


 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

  31.03.2020 31.12.2019
EUR thousand    
ASSETS    
Cash and cash equivalents 10,419 12,986
Short-term deposits 0 6,000
Receivables and accrued income 913 667
Prepaid expenses 59 51
Total current assets 11,391 19,704
    
Investment property 129,132 113,011
Property, plant and equipment 126 114
Total non-current assets 129,258 113,125
TOTAL ASSETS 140,649 132,829
     
LIABILITIES AND EQUITY    
Borrowings 21,394 21,147
Derivative instruments 276 271
Payables and prepayments 866 1,132
Total current liabilities 22,536 22,550
     
Borrowings 40,430 34,225
Other long-term liabilities 769 609
Deferred income tax liability 4,375 4,274
Total non-current liabilities 45,574 39,108
Total liabilities 68,110 61,658
     
Share capital 42,225 42,225
Share premium 9,658 9,658
Statutory reserve capital 936 936
Retained earnings 19,720 18,352
Total equity 72,539 71,171
TOTAL LIABILITIES AND EQUITY 140,649 132,829

Marilin Hein

CFO

Phone 655 9515

E-mail: marilin.hein@eften.ee

Attachment


EfTEN Real Estate Fund III_3kuud_2020_ENG.pdf