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:
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