The net value of EfTEN Real Estate Fund III AS shares as of 30.11.2022

Comment from the fund manager, Viljar Arakas:

During this week, the extraordinary general meetings of EfTEN Real Estate Fund III AS and EfTEN Kinnisvarafond AS are taking place, deciding on the merger of the two funds into the largest commercial real estate fund in the Baltic States. In light of the planned merger, in addition to the regular financial results of EfTEN Real Estate Fund III AS, we also present the consolidated unaudited financial results of EfTEN Kinnisvarafond AS for the 11 months of 2022 along with other important metrics. We believe that publishing the results of both funds to be merged before the general meetings gives shareholders a good opportunity to compare the latest financial indicators of the funds and their dynamics.

We are convinced that the merger of the funds is in the best interest of the shareholders of both funds. It ensures a better diversification of assets, both by business segments and geographically, thereby reducing the share of each individual property investment and the resulting risks. Among the 20 largest tenants of the two funds, there is only one overlapping tenant - Rimi (UKU Centre in Viljandi, RAF Centrs in Jelgava and Saules Miestas in Šiauliai). The merger will also create a larger market capitalization, which presumably will lift the merged fund to the ten largest companies listed in the Nasdaq Baltics.

In November, Colliers International conducted an extraordinary valuation of the property investments of both funds. The results of the extraordinary valuations are reflected in the financial statements of both funds as of 30.11.2022. This in turn ensures that by the time of the general meetings, the assets and net asset value of both funds will include the most up-to-date results. As investment properties account for more than 90% of the total assets in both funds, the most recent valuation is particularly important. The manager of both funds is EfTEN Capital AS, and we can confirm that the assets of both funds are valued on the same basis and based on similar market assumptions. The latest valuation results confirm once again that the two funds have behaved in the same way in different economic cycles - the value of the real estate portfolios of both funds decreased by 0.3%-0.4% in November as a result of the valuation. More detailed information about the extraordinary valuations carried out by Colliers International can be found in the attached summaries.

Financial results of EfTEN Real Estate Fund III AS

In the 11 months of this year, EfTEN Real Estate Fund III AS has earned 12.9 million euros in sales revenue (11% more than at the same time last year) and 10.7 million euros in EBITDA (10% and 998 thousand euros more than last year). 37% of the fund's EBITDA growth is related to the addition of new investment properties, and 63% of the growth comes from the better performance of the like-for-like real estate portfolio, both in connection with the reduced vacancy and the end of Covid-era discounts.

As of 30.11.2022, the volume of investment properties of EfTEN Real Estate Fund III AS totals 168.5 million euros (93% of the volume of assets), and the NOI (net rental income) of the real estate portfolio for the 11 months of this year is 12.3 million euros. The vacancy rate of the fund's properties was 0.6% as of 30.11.2022. The payment behavior of the tenants of the fund is good - as of the end of November, the fund's subsidiaries had only 15 thousand euros of unpaid invoices that exceeded more than 30 days their due dates.

The weighted average interest rate of the fund's bank loans was 3.13% as of 30.11.2022. Due to the increase in Euribor since June this year, interest rates on bank loans have increased by 0.83 percentage points.

This year, EfTEN Real Estate Fund III AS has earned 5.5 million euros in free cash flow, which is the basis of dividend payments (21% more than last year). Considering the fund's dividend policy, shareholders could be paid 87.4 euro cents (gross) dividends per share for the first 11 months (last year: 72.35 euro cents per share). 

In addition to the above, due to the loan agreement of Laagri Selver property, it is possible to increase the loan amount by 1 million euros, which we also plan to distribute as dividends to the shareholders in the spring of 2023. The free cash flow of the fund for 11 months, including the funds from refinancing, constitutes 6.5% of the average equity capital of EfTEN Real Estate Fund III AS this year.

As of 30.11.2022, the NAV of EfTEN Real Estate Fund III AS was 20.449 euros and the EPRA NRV was 21.79 euros. The fund's NAV decreased by 0.05% in November compared to October, and EPRA's NRV increased by 0.13%.

Financial results of EfTEN Kinnisvarafond AS

In the consolidated real estate portfolio of EfTEN Kinnisvarafond AS, there are 15 property investments with a total value of 196.15 million euros and one property owned by an affiliated company with a 50% ownership (Hotel Palace). Property investments make up a total of 93% of the fund's assets, and the value of the associated company makes up 1.2% of the fund's assets. The total volume of the fund's assets was 210.41 million euros as of 30.11.2022. The consolidated NOI of EfTEN Kinnisvarafond AS for the 11 months of this year is a total of 13.57 million euros.

The vacancy rate of EfTEN Kinnisvarafond AS' investment portfolio was 1.9% as of 30.11.2022. As of the end of November, the fund's subsidiaries have unpaid invoices for more than 30 days totaling 39 thousand euros, which is the fund's usual level.

In the 11 months of this year, EfTEN Kinnisvarafond AS has earned consolidated sales revenue of 14.8 million euros (3.6% more than last year) and 12.5 million euros of EBITDA (2.9% more than last year).

The weighted average interest rate of bank loans of subsidiaries of EfTEN Kinnisvarafond AS was 3.11% as of 30.11.2022. Due to the increase in Euribor since June of this year, interest rates on bank loans of EfTEN Kinnisvarafond AS have increased by 0.8 percentage points.

The adjusted free cash flow of EfTEN Kinnisvarafond AS (EBITDA minus interest expense and loan payments) is a total of 7.84 million euros this year (0.8 million euros more than last year). EfTEN Kinnisvarafond AS' cash flow has grown by 0.36 million euros from the increase in EBITDA due to the renting out vacancies and due to the increase in rental income, and the rest is related to lower interest expenses and loan payments. 

In addition to the above, due to the loan agreement of the Rakvere Police and Rescue Building, which is a subsidiary of EfTEN Kinnisvarafond AS, it is possible to increase the loan amount by 1 million euros, which we also plan to distribute as dividends to the shareholders in the spring of 2023. . The free cash flow of the fund for 11 months, including the funds from refinancing, constitutes 7.5% of the average equity capital of EfTEN Kinnisvarafond AS this year.

As of 30.11.2022, the NAV of EfTEN Kinnisvarafond AS was 3.1384 euros and the NRV of EPRA was 3.1558 euros.

Marilin Hein

CFO

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