Gross Asset Value (GAV)
In Q4 2019, the GAV increased from EUR 345.3 million to EUR 371.7 million compared to the end of Q3 2019. The increase is mainly related to a new acquisition during the quarter and the increase in cash as a result of the private placements. The Fund completed the acquisition of the North Star Business Centre on 11 October 2019 and thus has deployed the new capital raised in October 2019. The value of investment properties in use increased to EUR 356.6 million after the acquisition of the North Star Business Centre and year-end valuations.

Net Asset Value (NAV)
In Q4 2019, the Fund NAV increased from EUR 135.2 million to EUR 152.5 million compared to the end of Q3 2019. The Fund NAV was positively affected by the Fund’s operational performance and a positive cash flow hedge reserve movement during the quarter. The Fund raised additional equity in the amount of EUR 16.2 million (net equity) through private placements in October. However, this was offset by a EUR 3.06 million cash distribution to unitholders (EUR 0.027 per unit).

Net Rental Income and Net Profit
In Q4 2019, the Fund earned a net profit of EUR 3.4 million (EUR 3.5 million during Q4 2018). In Q4 2019, the Fund recorded a EUR 5.6 million net rental income (EUR 3.9 million in Q4 2018). Growth in net rental income was positively affected by new property acquisitions in 2019 (Duetto II office building, Galerija Centrs shopping centre and North Star Business Centre). Compared to Q4 2018, the Fund’s net profit slightly decreased mainly due to lower fair value gain resulting from year-end valuations. During Q4 2019, the Fund recorded a fair value gain of EUR 0.4 million whereas the fair value gain in Q4 2018 was EUR 1.5 million.

Cash Distributions (dividends)
On 31 January 2020, the Fund declared a EUR 3.18 million quarterly cash distribution to investors, which represents a EUR 0.028 distribution per unit for the Q4 2019 results (EUR 3.06 million or EUR 0.027 per unit for Q3 2019). In total, the Fund has paid out EUR 11.31 million from the operating results of 2019. The pay-out also represents a 8.0% rolling distribution yield based on the closing unit price of the last day of Q4 2019 on Nasdaq Tallinn stock exchange.

Quarterly key figures

Euro ‘000 Q4 2019 Q4 2018 Change (%)
       
Net rental income 5,635 3,929 43.4%
Valuations gains on investment properties 375 1,534 (75.6%)
Operating profit 5,167 4,685 10.3%
Net financing costs (1,401) (806) 73.8%
Profit before tax 3,766 3,879 (2.9%)
Net profit for the period 3,415 3,535 (3.4%)
       
Weighted average number of units outstanding 112,686,139 78,637,6451 43.3%
Earnings per unit (EUR) 0.03 0.04 (25.0%)


Euro ‘000 31.12.2019 31.12.2018 Change (%)
       
Investment property in use 356,575 245,160 45.4%
Gross asset value (GAV) 371,734 260,878 42.5%
       
Interest bearing loans 205,827 140,507 46.5%
Total liabilities 219,216 151,073 45.1%
       
Net asset value (NAV) 152,518 109,805 38.9%
Number of units outstanding 113,387,525 78,496,8311 44.4%
Net asset value (NAV) per unit (EUR) 1.3451 1.3988 (3.8%)
Loan-to-Value ratio (LTV) 57.7% 57.3%
Average effective interest rate 2.6% 2.4%
  1. The number of units excludes 255,969 units acquired by the Fund and cancelled in February 2019 as part of the unit buy-back program.

Investment properties PERFORMANCE in Q4 2019

During Q4 2019, the average actual occupancy of the portfolio was 98.0% (Q3 2019: 97.3%). When all rental
guarantees are considered, the effective occupancy rate is 98.0% (Q3 2019: 97.7%). The average direct property yield during Q4 2019 was 6.6% (Q3 2019: 6.7%). The net initial yield for the whole portfolio for Q4 2019 was 6.4% (Q3 2019: 6.5%).

Overview of the Fund’s investment properties as of 31.12.2019

Property name Sector Fair value1
Euro ‘000
NLA Direct property yield2 Net initial yield3 Occupancy rate for Q4 2019
             
Vilnius, Lithuania            
Duetto I Office 16,460 8,586 7.7% 7.1% 100.0%
Duetto II Office 18,935 8,674 7.1% 7.1% 100.0%
Europa SC Retail 40,711 16,856 6.2% 5.7% 96.7%
Domus Pro Retail Park Retail 16,670 11,247 6.8% 6.4% 97.5%
Domus Pro Office Office 7,740 4,831 8.7% 7.4% 100.0%
North Star Office 20,092 10,550 6.8% 6.9% 97.9%
Meraki Land   2,367 - -   -
Total Vilnius   122,975 60,744 6.9% 6.5% 98.3%
             
Riga, Latvia            
Upmalas Biroji BC Office 24,198 10,458 7.6% 7.2% 100.0%
Vainodes I Office 20,890 8,052 6.8% 6.9% 100.0%
LNK Centre Office 17,000 7,453 6.4% 6.5% 100.0%
Sky SC Retail 4,850 3,254 8.2% 8.0% 99.4%
Galerija Centrs Retail 76,409 20,022 6.2% 6.1% 96.0%
Total Riga   143,347 49,239 6.6% 6.5% 98.3%
             
Tallinn, Estonia            
Postimaja & CC Plaza Retail 32,250 9,145 4.2% 4.5% 92.4%
Postimaja & CC Plaza Leisure 15,150 8,664 9.0% 7.1% 100.0%
G4S Headquarters Office 17,550 9,179 7.7% 6.9% 100.0%
Lincona Office 17,820 10,871 8.0% 7.1% 100.0%
Pirita SC Retail 9,850 5,508 4.2% 5.3% 90.7%
Total Tallinn   92,620 43,367 6.1% 6.0% 97.2%
Total portfolio   358,942 153,350 6.6% 6.4% 98.0%
  1. Based on the latest valuation as at 31 December 2019 and recognised right-of-use assets.  
  2. Direct property yield (DPY) is calculated by dividing NOI by the acquisition value and subsequent capital expenditure of the property.
  3. The net initial yield (NIY) is calculated by dividing NOI by the market value of the property.

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 

Euro ‘000 01.10.2019-31.12.2019 01.10.2018-31.12.2018 01.01.2019-31.12.2019 01.01.2018-31.12.2018
         
Rental income 6,197 4,284 20,776 15,860
Service charge income 1,397 948 4,525 2,760
Cost of rental activities (1,959) (1,303) (6,082) (3,816)
Net rental income 5,635 3,929 19,219 14,804
         
Administrative expenses (846) (804) (3,251) (2,813)
Other operating income 3 26 26 74
Valuation gains (losses) on investment properties 375 1,534 (2,064) 2,014
Operating profit 5,167 4,685 13,930 14,079
         
Financial income 1 2 5 8
Financial expenses (1,402) (808) (4,718) (2,789)
Net financing costs (1,401) (806) (4,713) (2,781)
         
Profit before tax 3,766 3,879 9,217 11,298
Income tax charge (351) (344) (426) (1,308)
Profit for the period 3,415 3,535 8,791 9,990
         
Other comprehensive income that is or may be reclassified to profit or loss in subsequent periods
Net gains (losses) on cash flow hedges 802 (588) (595) (1,013)
Recognition of initial interest rate cap costs -   - (33)
Income tax relating to net gains (losses) on cash flow hedges (48) 55 44 97
Other comprehensive income (expense), net of tax, that is or may be reclassified to profit or loss in subsequent periods 754 (533) (551) (949)
         
Total comprehensive income for the period, net of tax 4,169 3,002 8,240 9,041
         
Basic and diluted earnings per unit (Euro)   0.03 0.04   0.09 0.13

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 

Euro ‘000 31.12.2019 31.12.2018
     
Non-current assets    
Investment properties 356,575 245,160
Investment property under construction 2,367 -
Derivative financial instruments 73 9
Other non-current assets 54 596
Total non-current assets 359,069 245,765
     
Current assets    
Trade and other receivables 1,794 2,229
Prepayments 301 154
Other current assets 734 505
Cash and cash equivalents 9,836 12,225
Total current assets 12,665 15,113
Total assets 371,734 260,878
     
Equity    
Paid in capital 138,064 93,673
Own units - (335)
Cash flow hedge reserve (1,556) (1,005)
Retained earnings 16,010 17,472
Total equity 152,518 109,805
     
Non-current liabilities    
Interest bearing loans and borrowings 205,718 140,401
Deferred tax liabilities 6,199 5,844
Derivative financial instruments 1,728 1,069
Other non-current liabilities 1,298 905
Total non-current liabilities 214,943 148,219
     
Current liabilities    
Interest bearing loans and borrowings 414 106
Trade and other payables 3,171 2,397
Income tax payable 8 -
Other current liabilities 680 351
Total current liabilities 4,273 2,854
Total liabilities 219,216 151,073
Total equity and liabilities 371,734 260,878

For additional information please contact:

Tarmo Karotam
Baltic Horizon Fund manager
E-mail tarmo.karotam@nh-cap.com
www.baltichorizon.com

Baltic Horizon Fund is a registered contractual public closed-end real estate fund managed by Alternative Investment Fund Manager license holder Northern Horizon Capital AS.

Distribution: Nasdaq Tallinn, Nasdaq Stockholm, GlobeNewswire, www.baltichorizon.com

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 15:20 EET on 14 February 2020.

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