EfTEN Real Estate Fund III AS unaudited financial results

The fund manager’s comments on the financial results of the first half-year of 2022

The first half-year of 2022 turned out to be successful for EfTEN Real Estate Fund III AS. The fund’s revenue increased to EUR 6.988 million, ie 17.3% compared to the last year’s first half-year. In June, the fund’s independent appraiser Colliers International valued the fund’s real estate portfolio, as a result of that the value of the fund’s investment properties increased by 2.2% and the fund earned profit in the amount of EUR 3.702 from the revaluation.

In the first half-year. The fund purchased two new investment properties – land plots for Valkla and Ermi care homes which are planned to accommodate up to 370 customers when finished. To purchase the care homes and initial investments total of EUR 2.343 million has been spent as of June 30, 2022.

In June, 2022, the fund’s subsidiary EfTEN Laagri OÜ extended its bank loan on current conditions (interest with the margin of 1.4%) for the next five years. In the following 12 months, the fund’s three loans that have mortgage on Laagri Hortes, Evolution office building and Piepilsetas logistics center will meet its’ maturity dates. All investment properties that are set as collateral have strong rental cash flow and LTV is between 31% and 41%, due to which the management does not see risk related to extending the loan contracts when the maturity date arrives. Rather, given the low level of LTV, Group managers see an opportunity to increase loan amounts and pay investors a higher dividend from the funds received.

As of June 30, 2022, the fund has EUR 3.5 million uninvested capital that is planned to use for development of purchased care home land plots.

Financial overview

The consolidated revenue of EfTEN Real Estate Fund III AS for the second quarter of 2022 was EUR 3.530 million (2021 second quarter: EUR 3.088 million), increasing by 14% during the year.

The consolidated revenue of EfTEN Real Estate Fund III AS for the first half-year of 2022 was EUR 6.988 million (2021 first half-year: EUR 5.955 million), increasing by 17% compared to last year (EUR 1.033 million). The Group’s net rental income of the first half-year of 2022 was EUR 6.666 million (2021: EUR 5.726 million), increasing by 17%. The Group’s net profit for the same period was EUR 7.882 million (2021: EUR 5.470 million).

In the first half-year of 2022, the consolidated net rental income margin was 95% (2021: 96%), thus, the expenses directly related to the management of real estate (incl. land tax, insurance, maintenance, and improvement costs. ) and marketing expenses accounted for 5% (2021: 4%) of revenue.

As of June 30, 2022, the volume of the Group’s total assets was EUR 178.422 million (31.12.2021: EUR 176.401 million), incl. the fair value of the investment properties that accounted for 95% of the total assets (31.12.2021: 92%).

Real estate portfolio

As of the on June, 2022, the Group had 18 (31.12.2021: 16) commercial real estate investments with a fair value as of balance sheet date in the amount of EUR 168.604 million (31.12.2021: EUR 161.961 million) and acquisition. cost of EUR 150.575 million (31.12.2021: EUR 147.633 million).

In April, the fund’s subsidiary EfTEN Valkla OÜ acquired real estate located in Valklaranna tee 36, Valkla. The fund plans to remodel the building from care home to general care home that could accommodate up to 250 customers in the future. Renovation work is performed in stages. The purchase price of the real estate plot was EUR 2005 thousand and in addition, the fund’s subsidiary is required to carry out investments on the amount of EUR 2,000 thousand. Purchase of the real estate plot and investments are financed by the fund’s own assets.

In April, the fund’s subsidiary EfTEN Ermi OÜ acquired building rights located in Ermi tn 13, Tila village, Tartu parish in Tartu county. The fund plans to develop a care home for minimum of 120 customers on the land plot used based on the building rights. The building rights’ maturity date is 50 years, which is possible to extend up to 99 years in agreement with the landowner. After developing a care home in the land plot, it will be leased to Südamekodud AS based on a long-term lease contract. The purchase price of the building rights was EUR 233 thousand- Purchase of the building rights and investments are financed by the fund’s own assets.

In the first half-year of 2022, the Group earned rental revenue of EUR 6.610 million. Rental income calculated in comparative terms was EUR 6.184 million in the first half-year on 2022, which is 11% (EUR 619 thousand) more than in 2021 at the same time. In the first half-year of 2022 the Group gave discounts related to Covid-19 crisis in the amount of EUR 9 thousand (2021 first half-year: EUR 317 thousand), ie the increase in rental income from indexation and decrease in vacancy is EUR 311 thousand (5%, compared to 2021) in the first half-year of 2022.

Financing

In the following 12 months, the Group’s three subsidiaries’ – Evolution office building, Laagri Hortes and Piepilsetas logistics center – loan contracts will end, the balance of the loans as of 30 June, 2022, is EUR 8,916 thousand euros. The LTV of maturing loan contracts is 31%-41% and investment properties have stable strong rental cash flow, due to which the Group’s management does not see risk related to extending the contracts.

The weighted average interest rate of the Group’s loan agreements (incl. taking into account interest rate swap agreements) as of at the end of June is 2.2% (2021: the same) and LTV (Loan to Value) is 42% (31.12. 2021: 44%). Most of the loan agreements of the fund’s subsidiaries are linked to a floating interest rate and only one loan (accounting for 2% of the loan portfolio) has a fixed base interest rate. In order to hedge the risk of an increase in the interest rate of one loan agreement, an interest rate swap agreement has been entered into, which expires in 2023.

Information on shares

As of 30 June, 2022, the net asset value per share (ERPA NDV) of EfTEN Real Estate Fund III AS was 19.86 euros (31.12.2021: 19.11 euros). The net asset value per share of EfTEN Real Estate Fund III AS increased by 4.0% in the first half-year of 2022.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

2nd quarter First half-year
€ thousands 2022 2021 2022 2021
Revenue 3,530 3,088 6,988 5,955
Cost of sales -71 -73 -131 -139
Gross profit 3,459 3,015 6,857 5,816
Marketing costs -117 -59 -191 -90
General and administrative expenses -448 -492 -903 -876
Gain / loss from revaluation of investment properties 3,702 2020 3,702 2020
Other operating income and expense 17 3 43 6
Operating profit 6,613 4,487 9,508 6,876
Other finance income and expense -360 -418 -722 -839
Profit before income tax 6,253 4,069 8,786 6,037
Income tax expense -649 -394 -904 -567
Net profit for the financial year 5,604 3,675 7,882 5,470
Earnings per share
– Basic 1.10 0.83 1.55 1.27
– Diluted 1.10 0.83 1.55 1.27

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

30.06.2022 31.12.2021
€ thousands
ASSETS
Cash and cash equivalents 8,489 13,074
Receivables and accrued income 1,113 876
Prepaid expenses 53 314
Inventory 0 29
Total current assets 9,655 14,293
Long-term receivables 3 4
Investment property 168,604 161,961
Property. plant and equipment 158 140
Intangible assets 2 3
Total non-current assets 168,767 162,108
TOTAL ASSETS 178,422 176,401
LIABILITIES AND EQUITY
Borrowings 11,873 7,645
Derivative instruments 0 121
Payables and prepayments 923 1,349
Total current liabilities 12,796 9,115
Borrowings 57,410 63,440
Other long-term debt 962 987
Deferred income tax liability 6,516 5,945
Total non-current liabilities 64,888 70,372
Total liabilities 77,684 79,487
Share capital 50,725 50,725
Share premium 16,288 16,288
Status reserve capital 2,149 1,489
retained earnings 31,576 28,412
Total equity 100,738 96,914
TOTAL LIABILITIES AND EQUITY 178,422 176,401

Marilin Hein

CFO
Phone +372 6559 515
E-mail: [email protected]

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