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BALTIC HORIZON FUND CONSOLIDATED UNAUDITED RESULTS FOR H1 2022

·14 min read
Baltic Horizon Fund / Northern Horizon Capital
Baltic Horizon Fund / Northern Horizon Capital

Management Board of Northern Horizon Capital AS has approved the unaudited consolidated interim financial statements of Baltic Horizon Fund (the Fund) for the six months of 2022.

Distributions to unitholders for Q1 2022 and Q2 2022 Fund results
On 28 April 2022, the Fund declared a cash distribution of EUR 1,555 thousand (EUR 0.013 per unit) to the Fund unitholders for Q1 2022 results. This represents a 1.17% return on the weighted average Q1 2022 net asset value to its unitholders.

On 28 July 2022, the Fund declared a cash distribution of EUR 1,555 thousand (EUR 0.013 per unit) to the Fund unitholders for Q2 2022 results. This represents a 1.17% return on the weighted average Q2 2022 net asset value to its unitholders.

With reduced payouts over 2020, 2021 and 2022 in the light of prevailing market uncertainty, the Fund has opted to retain EUR 7.2 million of distributable cash flow.

EUR ’000

Q2 2021

Q3 2021

Q4 2021

Q1 2022

Q2 2022

(+) Net rental income

4,357

4,676

3,798

4,193

4,482

(-) Fund administrative expenses

(756)

(735)

(633)

(659)

(726)

(-) External interest expenses

(1,311)

(1,407)

(1,408)

(1,372)

(1,403)

(-) CAPEX expenditure1

(92)

(38)

(222)

(266)

(369)

(+) Extraordinary income related to investment properties2

-

-

440

-

261

(+) Added back listing related expenses

-

-

-

-

-

(+) Added back acquisition related expenses

5

9

32

1

5

Generated net cash flow (GNCF)

2,203

2,505

 2,007

1,897

2,250

 

 

 

 

 

 

GNCF per weighted unit (EUR)

0.018

0.021

0.017

0.016

0.019

12-months rolling GNCF yield3 (%)

7.0%

7.0%

6.8%

7.6%

8.0%

 

 

 

 

 

 

Dividends declared for the period

 1,316

2,034

 2,273

 1,555

 1,555

Dividends declared per unit4 (EUR)

 0.011

0.017

 0.019

 0.013

 0.013

12-months rolling dividend yield3 (%)

5.0%

4.5%

5.4%

6.3%

6.9%

  1. The table provides actual capital expenditures for the quarter. Future dividend distributions to unitholders are aimed to be based on the annual budgeted capital expenditure plans equalised for each quarter. This will reduce the quarterly volatility of cash distributions to unitholders.

  2. 12-month rolling GNCF and dividend yields are based on the closing market price of the unit as at the end of the quarter (Q2 2022: closing market price of the unit as of 30 June 2022).

  3. Based on the number of units entitled to dividends.

Property valuations
In June 2022, the portfolio valuations were conducted by an independent real estate appraiser Colliers. As of 30 June 2022, the fair value of the Baltic Horizon Fund portfolio increased to EUR 335.6 million (31 December 2021: 327.4 million). In June 2022, the portfolio revaluation resulted in a fair value gain of EUR 0.2 million (+0.1% of portfolio value) primarily due to the upward revision of rent indexation and cash flow assumptions associated with high inflation across Europe.

Net result and net rental income
The Group recorded a net profit of EUR 4.2 million for H1 2022 against a net loss of EUR 9.2 million for H1 2021. The net result was mainly driven by strong recovery of the Galerija Centrs operating performance as fewer COVID-19 rent reliefs have been granted to tenants in 2022 and increased rent indexation.  The net result for H1 2021 was significantly impacted by the one-off negative valuation result of EUR 14.3 million. Meanwhile in H1 2022, the valuation resulted in a net fair value gain of EUR 0.2 million (+0.1% of portfolio value). The positive impact of the increase in net rental income was also supplemented by a decrease in administrative expenses and a grant of EUR 0.3 million received from the Latvian government. Earnings per unit for H1 2022 were EUR 0.04 (H1 2021: EUR -0.08).

The Group earned net rental income of EUR 8.7 million in H1 2022 compared to 8.5 million in H1 2021. The results for H1 2021 still included EUR 0.6 million of net rental income from G4S Headquarters, which was sold in Q4 2021 and did not contribute to H1 2022 results. Rent indexations and recovery of income improved the net rental income of the same portfolio mix (like-for-like portfolio).

Gross Asset Value (GAV)
At the end of H1 2022, the Fund’s GAV was EUR 347.5 million (31 December 2021: EUR 346.3 million), 0.3% higher than at the end of the previous period. The increase is mainly related to a positive property revaluation of EUR 0.2 million and capital investments (EUR 4.1 million) in the Meraki office building development project during H1 2022. The Fund aims to carry on with the construction of the Meraki office building throughout 2022 and 2023. An additional EUR 3.3 million was invested in other (re)development projects.

Net Asset Value (NAV)
At the end of H1 2022, the Fund’s NAV slightly increased to EUR 134.2 million (31 December 2021: EUR 132.6 million). Compared to the year-end 2021 NAV, the Fund’s NAV increased by 1.2%. The increase in operational performance, portfolio valuations and positive cash flow hedge reserve movement of EUR 1.2 million over the period was partially offset by a EUR 3.8 million dividend distribution to the unitholders. As of 30 June 2022, IFRS NAV per unit rose to EUR 1.1215 (31 December 2021: EUR 1.1082), while EPRA net tangible assets and EPRA net reinstatement value grew to EUR 1.2016 per unit (31 December 2021: EUR 1.1884). EPRA net disposal value was EUR 1.1177 per unit (31 December 2021: EUR 1.1086).

Investment properties
The Baltic Horizon Fund portfolio consists of 14 cash flow generating investment properties in the Baltic capitals and an investment property under construction on the Meraki land plot. At the end of Q2 2022, the fair value of the Fund’s portfolio was EUR 335.7 million (31 December 2021: EUR 327.4 million) and incorporated a total net leasable area of 144,215 sq. m. During H1 2022, the Fund invested EUR 0.6 million in the existing property portfolio and EUR 7.5 million in the reconstruction or development projects.

Interest-bearing loans and bonds
Interest-bearing loans and bonds (excluding lease liabilities) were EUR 198.4 million, remaining at a level similar to year-end 2021 (31 December 2021: EUR 198.6 million). Outstanding bank loans decreased slightly due to regular bank loan amortisation. Annual loan amortisation accounts for 0.3% of total debt outstanding. All loans expiring during H1 2022 were prolonged with the original loan providers.

Cash flow
Cash inflow from core operating activities for H1 2022 amounted to EUR 7.3 million (H1 2021: cash inflow of EUR 6.4 million). Cash outflow from investing activities was EUR 7.6 million (H1 2021:  cash outflow of EUR 2.7 million) due to subsequent capital expenditure on existing portfolio properties and investments in the Meraki, Postimaja and CC Plaza complex and Europa development projects. Cash outflow from financing activities was EUR 7.1 million (H1 2021: cash outflow of EUR 1.6 million). During H1 2022, the Fund made a cash distribution of EUR 3.8 million and paid regular interest on bank loans and bonds. At the end of H1 2022, the Fund’s consolidated cash and cash equivalents amounted to EUR 8.7 million (31 December 2021: EUR 16.1 million), which demonstrates sufficient liquidity and financial flexibility. Available cash will be used to continue with development projects.

Key earnings figures

EUR ‘000

 

 

 

Q2 2022

Q2 2021

Change (%)

Net rental income

 

 

 

4,482

4,357

2.9%

Administrative expenses

 

 

(726)

(756)

4.0%

Other operating income

 

 

271

-

-

Valuation gains (losses) on investment properties

178

(14,255)

101.2%

Operating profit (loss)

 

 

 

4,205

(10,654)

139.5%

Net financing costs

 

 

 

(1,518)

(1,361)

(11.5%)

Profit (loss) before tax

 

 

 

2,687

(12,015)

122.4%

Income tax

 

 

 

(444)

888

(150.0%)

Net profit (loss) for the period

 

 

2,243

(11,127)

120.2%

 

 

 

 

 

 

 

 

Weighted average number of units outstanding (units)

119,635,429

119,635,429

-

Earnings per unit (EUR)

 

 

0.02

(0.09)

120.2%


Key financial position figures

EUR ‘000

 

 

 

30.06.2022

31.12.2021

Change (%)

Investment properties in use

 

 

320,029

315,959

1.3%

Investment property under construction

 

 

15,620

11,400

37.0%

Gross asset value (GAV)

 

 

347,495

346,338

0.3%

 

 

 

 

 

 

 

 

Interest-bearing loans and bonds

 

 

198,360

198,571

(0.1%)

Total liabilities

 

 

 

213,319

213,754

(0.2%)

 

 

 

 

 

 

 

 

IFRS Net asset value (IFRS NAV)

 

 

134,176

132,584

1.2%

EPRA Net Reinstatement Value (EPRA NRV)

 

 

143,752

142,176

1.1%

 

 

 

 

 

 

Number of units outstanding (units)

 

 

119,635,429

119,635,429

-

IFRS Net asset value (IFRS NAV) per unit (EUR)

1.1215

1.1082

1.2%

EPRA Net Reinstatement Value (EPRA NRV) per unit (EUR)

1.2016

1.1884

1.1%

 

 

 

 

 

 

Loan-to-Value ratio (%)

 

 

59.1%

60.7%

-

Average effective interest rate (%)

 

 

2.8%

2.7%

-

During Q2 2022, the average actual occupancy of the portfolio was 93.4% (Q1 2022: 92.3%). The occupancy rate as of 30 June 2022 was 93.3% (31 March 2022: 92.4%). The overall occupancy rates in the portfolio rose after the successful launch of the North Star office hotel and filling the premises with small tenants. Increasing occupancy figures were supplemented with new leases in Europa, Postimaja and Galerija Centrs. During the quarter, Sportland relocated and expanded its premises to almost 1,000 sq. m in Galerija Centrs. In Europa, Huracan Coffee opened its café of approx. 140 sq. m creating a new attraction point for clients coming in from the main square of CBD. The opening of Huracan marked the full reopening of Europa’s entrances and public areas to clients after the refurbishment.

Occupancy rates in the office segment remain strong at around 98%. Positive momentum in office leasing is expected to continue in Q3 2022. Retail leasing teams were expanded in H1 2022 to fasten the leasing process. The Fund is having in-depth negotiations with potential anchor tenants for shopping centres. The average direct property yield during Q2 2022 was 5.3% (Q1 2022: 5.0%). The net initial yield for the whole portfolio for Q2 2022 rose to 5.6% (Q1 2022: 5.3%). Property yields increased compared to Q1 2022 after a strong recovery of Galerija Centrs results following the lift of lockdowns at the end of 2021 and positive rent indexations across the portfolio.

Overview of the Fund’s investment properties as of 30 June 2022

Property name

Sector

Fair value1
(EUR ‘000)

NLA
(sq. m)

Direct property yield
Q2 20222

Net initial yield
Q2 20223

Occupancy rate

Vilnius, Lithuania

 

 

 

 

 

 

Duetto I

Office

18,525

8,587

7.7%

6.5%

100.0%

Duetto II

Office

20,253

8,674

7.7%

7.1%

100.0%

Europa SC

Retail

38,757

16,844

1.8%

1.9%

84.5%

Domus Pro Retail Park

Retail

16,535

11,226

8.4%

8.1%

98.5%

Domus Pro Office

Office

8,010

4,831

8.7%

7.1%

97.3%

North Star

Office

21,538

10,550

6.7%

6.8%

98.2%

Meraki Development

Office

15,620

-

-

-

-

Total Vilnius

 

139,238

60,712

5.6%

5.4%

94.9%

Riga, Latvia

 

 

 

 

 

 

Upmalas Biroji BC

Office

21,978

10,459

7.5%

8.2%

100.0%

Vainodes I

Office

18,470

8,052

6.6%

7.8%

100.0%

LNK Centre

Office

17,660

7,452

6.8%

6.8%

100.0%

Sky SC

Retail

5,693

3,244

8.1%

7.8%

97.6%

Galerija Centrs

Retail

64,910

20,075

3.1%

3.6%

77.2%

Total Riga

 

128,711

49,282

5.0%

5.6%

90.6%

Tallinn, Estonia

 

 

 

 

 

 

Postimaja & CC Plaza complex

Retail

26,975

9,242

9.2%

7.6%

95.6%

Postimaja & CC Plaza complex

Leisure

14,525

8,664

3.6%

4.5%

100.0%

Lincona

Office

16,900

10,871

7.3%

6.8%

90.8%

Pirita SC

Retail

9,300

5,444

5.1%

6.7%

90.4%

Total Tallinn

 

67,700

34,221

5.5%

6.0%

94.4%

Total portfolio

 

335,649

144,215

5.3%

5.6%

93.3%

  1. Based on the latest valuation as of 30 June 2022 and recognised right-of-use assets.

  2. Direct property yield (DPY) is calculated by dividing annualized NOI by the acquisition value and subsequent capital expenditure of the property.

  3. The net initial yield (NIY) is calculated by dividing annualized NOI by the market value of the property.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

EUR ‘000

 

01.04.2022-30.06.2022

01.04.2021-30.06.2021

01.01.2022-30.06.2022

01.01.2021-30.06.2021

Rental income

 

5,111

4,835

10,070

9,512

Service charge income

 

1,341

1,209

2,645

2,426

Cost of rental activities

 

(1,970)

(1,687)

(4,040)

(3,408)

Net rental income

 

4,482

4,357

8,675

8,530

 

 

 

 

 

 

Administrative expenses

 

(726)

(756)

(1,385)

(1,501)

Other operating income

 

271

-

278

-

Valuation gains (losses) on investment properties

 

178

(14,255)

172

(14,259)

Operating profit (loss)

 

4,205

(10,654)

7,740

(7,230)

 

 

 

 

 

 

Financial income

 

-

1

-

1

Financial expenses

 

(1,518)

(1,362)

(2,960)

(2,752)

Net financial expenses

 

(1,518)

(1,361)

(2,960)

(2,751)

 

 

 

 

 

 

Profit (loss) before tax

 

2,687

(12,015)

4,780

(9,981)

Income tax charge

 

(444)

888

(541)

759

Profit (loss) for the period

 

2,243

(11,127)

4,239

(9,222)

Other comprehensive income that is or may be reclassified to profit or loss in subsequent periods

Net gain on cash flow hedges

 

575

241

1,296

451

Income tax relating to net gain on cash flow hedges

 

(51)

(16)

(115)

(31)

Other comprehensive income, net of tax, that is or may be reclassified to profit or loss in subsequent periods

 

524

225

1,181

420

 

 

 

 

 

 

Total comprehensive income (expense) for the period, net of tax

 

2,767

(10,902)

5,420

(8,802)

 

 

 

 

 

 

Basic and diluted earnings per unit (EUR)

 

0.02

(0.09)

0.04

(0.08)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

EUR ‘000

 

30.06.2022

31.12.2021

Non-current assets

 

 

 

Investment properties

 

320,029

315,959

Investment property under construction

 

15,620

11,400

Intangible assets

 

8

9

Property, plant and equipment

 

2

2

Derivative financial instruments

 

439

-

Other non-current assets

 

22

23

Total non-current assets

 

336,120

327,393

 

 

 

 

Current assets

 

 

 

Trade and other receivables

 

2,214

2,708

Prepayments

 

423

137

Cash and cash equivalents

 

8,738

16,100

Total current assets

 

11,375

18,945

Total assets

 

347,495

346,338

 

 

 

 

Equity

 

 

 

Paid in capital

 

145,200

145,200

Cash flow hedge reserve

 

352

(829)

Retained earnings

 

(11,376)

(11,787)

Total equity

 

134,176

132,584

 

 

 

 

Non-current liabilities

 

 

 

Interest-bearing loans and borrowings

 

102,765

157,471

Deferred tax liabilities

 

6,959

6,297

Derivative financial instruments

 

-

756

Other non-current liabilities

 

1,261

1,103

Total non-current liabilities

 

110,985

165,627

 

 

 

 

Current liabilities

 

 

 

Interest-bearing loans and borrowings

 

96,153

41,676

Trade and other payables

 

5,479

5,223

Income tax payable

 

-

5

Derivative financial instruments

 

15

109

Other current liabilities

 

687

1,114

Total current liabilities

 

102,334

48,127

Total liabilities

 

213,319

213,754

Total equity and liabilities

 

347,495

346,338


For more information, please contact: 

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

The Fund is a registered contractual public closed-end real estate fund that is managed by Alternative Investment Fund Manager license holder Northern Horizon Capital AS. Both the Fund and the Management Company are supervised by the Estonian Financial Supervision Authority.

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 22:00 EET on 8 August 2022.

Attachment