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Baltic Horizon Fund Consolidated Un-Audited Results for H1 2019

Gross Asset Value (GAV)
In Q2 2019, the GAV increased from EUR 269.5 million to EUR 344.9 million compared to the end of Q1 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 Galerija Centrs Shopping Centre on 13 June 2019 and thus has deployed most of the new capital raised in April and May 2019. The value of investment properties increased to EUR 336.3 million after the acquisition of the Galerija Centrs Shopping Centre and mid-year valuations.  

Net Asset Value (NAV)
In Q2 2019, the Fund NAV increased from EUR 109.3 million to EUR 131.1 million compared to the end of Q1 2019. The Fund NAV was positively affected by the Fund’s operational performance over the quarter and capital raisings in the amount of EUR 24.5 million (net equity) through private placements in April and May. However, this was offset by a EUR 2.5 million cash distribution to unitholders (EUR 0.025 per unit) and a negative cash flow hedge reserve movement during the quarter.

Net Rental Income and Net Profit
In Q2 2019, the Fund earned a net profit of EUR 0.1 million (EUR 2.6 million during Q2 2018). The decrease in the net result was mainly attributable to investment property revaluation losses. The fair values of investment properties in the Fund’s portfolio dropped slightly due to downward adjustments in the EU and Baltic consumer price index levels for the coming years, which are used in valuation calculations. During the quarter, the Group recognised revaluation losses of EUR 2.4 million. In Q2 2019, the Fund recorded a EUR 4.3 million net rental income (EUR 3.6 million in Q2 2018). Growth in net rental income was positively affected by new property acquisitions at the end of 2018 and the beginning of 2019 (LNK Centre office building, Duetto II office building, and Galerija Centrs shopping centre).

Cash Distributions (dividends)
On 2 August 2019, the Fund declared a EUR 2.62 million quarterly cash distribution to investors, which represents a EUR 0.026 distribution per unit for the Q2 2019 results (EUR 2.45 million or EUR 0.025 per unit for Q1 2019).

Key figures

Euro ‘000 Q2 2019 Q2 2018 Change (%)
       
Net rental income 4,256 3,626 17.4%
Valuation gains (losses) on investment properties (2,439) 480 (608.1%)
Operating profit 1,000 3,524 (71.6%)
Net financing costs (1,076) (714) 50.7%
Profit (loss) before tax (76) 2,810 (102.7%)
Net profit for the period 144 2,576 (94.4%)
       
Weighted average number of units outstanding 94,949,766 79,157,094 20.0%
Earnings per unit (EUR) - 0.03 (100.0%)


Euro ‘000 30.06.2019 31.12.2018 Change (%)
       
Investment property in use 336,310 245,160 37.2%
Gross asset value (GAV) 344,886 260,878 32.2%
       
Interest bearing loans 197,001 140,507 40.2%
Total liabilities 213,804 151,073 41.5%
       
Net asset value (NAV) 131,082 109,805 19.4%
Number of units outstanding 97,964,044 78,496,8311 24.8%
Net asset value (NAV) per unit (EUR) 1.3381 1.3988 (4.3%)
Loan-to-Value ratio (LTV) 58.6% 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 Q2 2019

During Q2 2019, the average actual occupancy of the portfolio was 95.4% (Q1 2019: 96.6%). When all rental guarantees are considered, the effective occupancy rate is 96.7% (Q1 2019: 97.3%). The average direct property yield during Q2 2019 was 6.8% (Q1 2019: 6.7%). The net initial yield for the whole portfolio for Q2 2019 was 6.5% (Q1 2019: 6.3%).

Overview of the Fund’s investment properties as of 30.06.2019

Property name Sector Market value1
Euro ‘000
NLA Direct property yield2 Net initial yield3 Occupancy rate for Q2 2019
             
Vilnius, Lithuania            
Duetto I Office 16,020 8,498 7.7% 7.1% 98.7%4
Duetto II Office 17,900 8,636 7.1% 7.2% 100.0%4
Europa SC Retail 40,360 16,856 6.8% 6.1% 95.1%
Domus Pro Retail Park Retail 16,510 11,247 7.4% 6.7% 98.1%
Domus Pro Office Office 7,530 4,831 8.7% 7.5% 100.0%
Meraki Land   1,700 - - - -
Total Vilnius   100,020 50,068 7.2% 6.7% 97.7%
             
Riga, Latvia            
Upmalas Biroji BC Office 25,220 10,458 7.2% 6.7% 100.0%
Vainodes I Office 21,490 8,052 6.9% 6.9% 100.0%
LNK Centre Office 16,830 7,453 6.3% 6.2% 100.0%
Sky SC Retail 5,370 3,254 8.4% 7.8% 99.4%
Galerija Centrs Retail 75,840 23,862 6.9% 6.8% 95.8%
Total Riga   144,750 53,079 6.9% 6.7% 99.3%
             
Tallinn, Estonia            
Postimaja & CC Plaza Retail 32,140 9,145 4.2% 4.5% 90.6%
Postimaja & CC Plaza Leisure 14,980 8,664 8.5% 6.9% 100.0%
G4S Headquarters Office 17,130 9,179 6.4% 5.8% 87.0%
Lincona Office 17,480 10,871 8.1% 7.4% 98.3%
Pirita SC Retail 9,810 5,508 6.6%5 8.1%5 91.1%
Total Tallinn   91,540 43,367 6.1% 6.0% 93.7%
Total portfolio   336,310 146,514 6.8% 6.5% 96.7%
  1. Based on the latest valuation as at 30 June 2018.
  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.
  4. Duetto II effective occupancy rate is 100% due to a rental guarantee. The rental guarantee provided to Duetto I expired in March.
  5. In Q2 2019, the actual annualized average direct property yield of the Pirita SC was negative at 1.4%. The actual net initial yield during Q2 2019 was negative at 1.8%. Actual yields were negative due to a partial write-off of a rental guarantee accrual (EUR 153 thousand) and impairment of trade receivables (EUR 91 thousand) during Q2 2019. The impairment and write-off were excluded from yield calculations as they are considered a one-off event.

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 

Euro ‘000 01.04.2019-30.06.2019 01.04.2018-30.06.2018 01.01.2019-30.06.2019 01.01.2018-30.06.2018
         
Rental income 4,646 3,958 8,797 7,564
Service charge income 889 608 1,652 1,193
Cost of rental activities (1,279) (940) (2,277) (1,722)
Net rental income 4,256 3,626 8,172 7,035
         
Administrative expenses (817) (621) (1,526) (1,261)
Other operating income - 39 6 45
Valuation gains (losses) on investment properties (2,439) 480 (2,439) 480
Operating profit 1,000 3,524 4,213 6,299
         
Financial income 1 2 3 4
Financial expenses (1,077) (716) (1,976) (1,205)
Net financing costs (1,076) (714) (1,973) (1,201)
         
Profit (loss) before tax (76) 2,810 2,240 5,098
Income tax charge 220 (234) 77 (838)
Profit for the period 144 2,576 2,317 4,260
         
Other comprehensive income that is or may be reclassified to profit or loss in subsequent periods
Net gains (losses) on cash flow hedges (536) (315) (1,092) (630)
Recognition of initial interest rate cap costs - (33) - (33)
Income tax relating to net gains (losses) on cash flow hedges 39 34 75 79
Other comprehensive income (expense), net of tax, that is or may be reclassified to profit or loss in subsequent periods (497) (314) (1,017) (584)
         
Total comprehensive income (expense) for the period, net of tax (353) 2,262 1,300 3,676
         
Basic and diluted earnings per unit (Euro) 0.00 0.03 0.03 0.05


CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 

Euro ‘000 30.06.2019 31.12.2018
     
Non-current assets    
Investment properties 336,310 245,160
Derivative financial instruments 33 9
Other non-current assets 95 596
Total non-current assets 336,438 245,765
     
Current assets    
Trade and other receivables 2,301 2,229
Prepayments 339 154
Other current assets 856 505
Cash and cash equivalents 4,952 12,225
Total current assets 8,448 15,113
Total assets 344,886 260,878
     
Equity    
Paid in capital 117,883 93,673
Own units - (335)
Cash flow hedge reserve (2,022) (1,005)
Retained earnings 15,221 17,472
Total equity 131,082 109,805
     
Non-current liabilities    
Interest bearing loans and borrowings 196,613 140,401
Deferred tax liabilities 5,674 5,844
Derivative financial instruments 2,186 1,069
Other non-current liabilities 1,271 905
Total non-current liabilities 205,744 148,219
     
Current liabilities    
Interest bearing loans and borrowings 388 106
Trade and other payables 6,710 2,397
Income tax payable 1 -
Other current liabilities 961 351
Total current liabilities 8,060 2,854
Total liabilities 213,804 151,073
Total equity and liabilities 344,886 260,878

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 14:00 EET on 16 August 2019.

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