EfTEN Real Estate Fund III unaudited results for 2nd quarter and 1st half-year 2020
EfTEN Real Estate Fund III AS's consolidated sales revenue for the second quarter of 2020 totaled 2.422 million euros (2nd quarter of 2019: 2.321 million euros), increasing by 4.4%. The sales revenue of the two properties acquired at the end of February 2020 (airBaltic office building and Kekava logistics center in Riga) and Tähesaju Hortes completed at the end of last year totaled 386 thousand euros in the second quarter of 2020, ie sales revenue in the second quarter of the 2020 of new real estate investments accounted for 16.6%. The sales revenue of other investment properties decreased mainly due to the negative economic impact of Covid-19 and the concluded lease reduction agreements.
EfTEN Real Estate Fund III AS's consolidated sales revenue for the first half of 2020 was 4.865 million euros (first half of 2019: 4.636 million euros), increasing by 4.9%. The Group's profit before revaluations of investment properties, changes in the fair value of interest rate swaps and income tax expense totaled 3.132 million euros in the first half of 2020 (first half of 2019: 2.882 million euros), increasing by 8.7%. Due to the economic uncertainty caused by Covid-19, the expected decrease in cash flows and the resulting decrease in the fair value of investment properties, the Group earned the first net loss of its operating period in the total amount of 1.065 million euros.
In the first half of 2020, the fund earned consolidated EBITDA of 3.8 million euros (first half of 2019: 3.6 million euros). From the EBITDA growth, 0.3 million euros is related to the addition of airBaltic's office building and Kekava logistics building and 0.2 million euros is related to the addition of Tähesaju Hortes rental income to the fund's real estate portfolio. Because of the Covid-19 crisis and the resulting temporary discounts, the EBIDTA has decreased by 0.2 million euros compared to the previous year. All temporary discounts will end no later than September of this year. According to the fund's management, the negative economic impact of the Covid-19 crisis on the fund's results is smaller than initially expected, partly due to the well-diversified real estate portfolio of EfTEN Real Estate Fund III AS by sectors and countries, strong tenant base, good capitalization and conservative financing strategy.
During the first half of 2020, the Group has earned a free cash flow of 1.7 million euros (6 months of 2019: the same), of which the cash flow from investment properties added this year amounts to 234 thousand euros. Discounts on leases caused by the special situation arising from Covid-19 totaled 254 thousand euros in the first half of 2020, ie due to temporary special agreements with tenants, the Group's free cash flow in the first half of 2020 has decreased by 13%.
In June 2020, Colliers International conducted a regular valuation of the fund's real estate portfolio, this time even more conservative than before due to the economic uncertainty arising from Covid-19. While yield rates as an input to valuations did not change for any investment property, the discount rates for most properties have risen by 0.3 percentage points due to the expected rise in interest rates. However, the lower cash flow forecast had an even more significant effect on the values of real estate investments, where Colliers International estimates that in the 1 to 1.5 year plan, rental income could be expected to decrease by approximately 4% from its normal level for some properties. Overall, the value of the fund's real estate portfolio decreased by 3.99 million euros (3.1%) as a result of valuations.
As at end of June 2020, the Group has 13 (31.12.2019: 11) commercial investment properties with a fair value as at the balance sheet date of EUR 125.328 million (31.12.2019: EUR 113.011 million) and acquisition cost of EUR 118.053 million (31.12.2019: EUR 101.746 million).
As at 30.06.2020, the Group’s total assets were in the amount of EUR 137.676 million (31.12.2019: EUR 132.829 million), including fair value of investment property, which accounted for 91% (31.12.2019: 85%) of the total assets.
The net asset value of the share of EfTEN Real Estate Fund III as at 30.06.2020 was EUR 15.95 (31.12.2019: EUR 16.85). The net asset value of the share of EfTEN Real Estate Fund III AS decreased by 5.4% in the first half of 2020. The net asset value of the share decreased by 5.6%, mainly due to the economic instability caused by Covid-19 and the resulting change in the fair value of the Group's investment properties. Due to the declaration of dividends in the amount of 2,745 thousand euros in June 2020, the net asset value of the share decreased by an additional 4.2%. Without the change in the value of real estate investments and profit distribution, the net asset value of EfTEN Real Estate Fund III would have increased by 4.4% in the first half of 2020.
During the next 12 months, there will be deadlines for several loan agreements of the Group subsidiaries. Most of the Group's borrowings are concluded with a term of 5 years, which is refinanced upon termination of the loan agreement. Over the next 12 months, 34.285 million euros, meaning 56.1% of the total loan portfolio, will be refinanced from the Group's loan liabilities. As at 30.06.2020, the average interest rate of the Group's loan agreements (considering interest rate swap agreements) is 2.01% (31.12.2019: 1.84%) and LTV (Loan to Value) is 54% (31.12.2019: 52%).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| II quarter | I half of 2020 | |||
| € thousands | 2020 | 2019 | 2020 | 2019 |
| Revenue | 2,422 | 2,321 | 4,865 | 4,636 |
| Cost of services sold | -59 | -71 | -147 | -147 |
| Gross profit | 2,363 | 2,250 | 4,718 | 4,489 |
| Marketing costs | -43 | -134 | -136 | -220 |
| General and administrative expenses | -358 | -376 | -772 | -664 |
| Loss on change in fair value of investment property | -3,986 | 1,460 | -3,986 | 1,460 |
| Other operating income and expense | -5 | 0 | 0 | -1 |
| Operating profit | -2,029 | 3,200 | -176 | 5,064 |
| Finance costs | -345 | -392 | -678 | -730 |
| Profit before income tax | -2,374 | 2,808 | -854 | 4,334 |
| Income tax expense | -59 | -479 | -211 | -636 |
| Total comprehensive income for the financial period | -2,433 | 2,329 | -1,065 | 3,698 |
| Earnings per share | ||||
| - Basic | -0.58 | 0.68 | -0.25 | 1.11 |
| - Diluted | -0.58 | 0.68 | -0.25 | 1.11 |
CONSOLIDA STATEMENT OF FINANCIAL POSITION
| 30.06.2020 | 31.12.2019 | |
| € thousands | ||
| ASSETS | ||
| Cash and cash equivalents | 10,920 | 12,986 |
| Short-term deposits | 0 | 6,000 |
| Receivables and accrued income | 1,199 | 667 |
| Prepaid expenses | 55 | 51 |
| Total current assets | 12,174 | 19,704 |
| Investment property | 125,328 | 113,011 |
| Property, plant and equipment | 170 | 114 |
| Intangible assets | 4 | 0 |
| Total non-current assets | 125,502 | 113,125 |
| TOTAL ASSETS | 137,676 | 132,829 |
| LIABILITIES AND EQUITY | ||
| Borrowings | 37,147 | 21,147 |
| Derivative instruments | 284 | 271 |
| Payables and prepayments | 4,062 | 1,132 |
| Total current liabilities | 41,493 | 22,550 |
| Borrowings | 23,882 | 34,225 |
| Other long-term liabilities | 790 | 609 |
| Deferred income tax liability | 4,150 | 4,274 |
| Total non-current liabilities | 28,822 | 39,108 |
| Total liabilities | 70,315 | 61,658 |
| Share capital | 42,225 | 42,225 |
| Share premium | 9,658 | 9,658 |
| Statutory reserve capital | 1,323 | 936 |
| Retained earnings | 14,155 | 18,352 |
| Total equity | 67,361 | 71,171 |
| TOTAL LIABILITIES AND EQUITY | 137,676 | 132,829 |
Marilin Hein
CFO
Phone 655 9515
E-mail:
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