Fund manager’s commentary on the results for the year 2021.
The year 2021 turned out to be a successful year beyond expectations for EfTEN Real Estate Fund III AS. Despite the two waves of coronavirus that occurred during the year, the group increased both rental income and EBITDA from each segment of commercial real estate, even excluding income from new commercial properties. The vacancy rate for retail space in the portfolio remained at a historically low level of less than 1%. The revaluation of investment properties generated a total profit of EUR 6.4 million for 2021 and the unleveraged primary net return of the portfolio was 7.1% at the end of the year. The fund generated total free cash flow of €4.55 million in 2021, of which the total gross dividend would be €3.64 million according to the fund’s dividend policy. Given the obligation to maintain a minimum of cash resulting from the specific conditions of the loans of the Fund’s subsidiaries and the short-term liquidity needs, the Management Board of the Fund proposes to the Supervisory Board to pay dividends in excess of the dividend policy, for a total amount of EUR 4.06 million (80 cents per share).
As of 31.12.2021, the Fund has 5.9 million euros of uninvested equity, the safe investment of which is a priority for the management of the Fund. In view of the fact that the level of return on transactions in the Baltic commercial real estate market has been steadily declining in recent years, the management of the Fund does not plan to organize a new share issue during of the current fiscal year.
The consolidated turnover of EfTEN Real Estate Fund III AS for the 12 months of 2021 amounted to 12.921 million euros (12 months 2020: 10.731 million euros), up 20% from a year to year. Group net rental income for 2021 amounted to EUR 12.412 million (2020: EUR 10.103 million), up 23%. The Group’s net profit for the same period amounted to EUR 13.099 million (2020 12 months: EUR 3.317 million).
The Fund generated total revenues of €3.508 million in the fourth quarter of 2021, up €475 thousand (16%) compared to the same period last year. The Fund’s net rental income for the fourth quarter of 2021 amounted to 2,916 thousand euros, an increase of 17.7% compared to the same period last year.
In December 2021, Colliers International carried out a regular valuation of the Fund’s property portfolio, which resulted in a 2.8% (EUR 4.423 million) increase in the value of the property portfolio, mainly due to the expected rental cash flow and of lower output yields. The Fund’s consolidated net profit for the fourth quarter amounted to €5.355 million (Q4 2020: €2,310 million).
The consolidated net margin on rental income for the 12 months of 2021 was 96% (2020 12 months: 94%), so that the costs directly related to property management (including property tax, insurance, costs maintenance and improvements) and marketing costs represented 4% (2020: 6%) of sales. Interest charges increased in 2021 due to the addition of loans contracted for the acquisition of new real estate investments, but also due to an increase in the interest rate of 0.3 to 0.5 points percentage following the refinancing of loans contracted for the acquisition of new real estate investments. the Ulonu office building and the DSV logistics centers.
The assets of the Group as at 31.12.2021 amounted to 176.401 million EUR (31.12.2020: 151.632 million EUR), i.e. the fair value of the investment properties represented 92% of the assets (31.12.2020: 95%).
2021, the Group received bank loans for the acquisition and development of new real estate investments for a total of 6.3 million euros. The weighted average interest rate of the Group’s loan contracts (including interest rate swap contracts) at the end of December is 2.3% (31.12.2020: identical) and LTV (Loan to Value) of 44% (31.12.2020: 50%).
Real estate portfolio
Mid-June 2021, the Group acquired a new real estate investment in Panevežyse, Lithuania. The total cost of the real estate investment, including transaction costs, amounted to EUR 10.011 million and the annual rental income of the building is EUR 799 thousand.
At the end of December 2021, the Group has 16 (31.12.2020: 15) commercial real estate investments with a fair value at the balance sheet date of 161.961 million EUR (31.12.2020: 144.235 million EUR) and an acquisition cost of 147.557 EUR. million (31.12.2020: EUR 136.349 million).
In 2021, the Group generated total rental income of €12,165 thousand. Rental income calculated on a comparable basis amounts to 9,283 thousand euros in 2021, i.e. 7% more than in 2020. In 2021, the Group agreed to a total of 369 thousand euros in depreciation linked to the Covid-19 crisis, i.e. without these impairments. declines, the Group’s rental income in 2021 would have been 2.9% higher.
The net asset value per share of EfTEN Real Estate Fund III AS on 31.12.2021 was 19.11 EUR (31.12.2020: 16.93 EUR). The net asset value of the share of EfTEN Real Estate Fund III AS increased by 12.9% in 2021. In June 2021, the fund paid dividends on the profit of 2020 for a total of 2.798 million euros (spring 2020: 2.745 million euros). Without the payment of dividends, the net asset value of the Fund would have increased by 16.3% in 2021.
In addition to the net asset value per share calculated in accordance with the IFRS standards mentioned above, EfTEN Real Estate Fund III AS also calculates the net asset value per share recommended by EPRA (European Public Real Estate Association) in order to to provide investors with the most appropriate fair value. net asset value. The guidance recommended by EPRA assumes a long-term economic strategy for real estate companies, so timing differences in a situation where no sale of assets is likely to take place in the foreseeable future will cloud the transparency of the fair value of the fund’s net assets. Consequently, the deferred tax expense related to investment properties and the fair value of financial instruments (interest rate swaps) are eliminated from the net asset value calculated according to IFRS to arrive at the net asset value. EPRA inventory.
In 2021, the Group generated free cash flow of €4.550 million (2020 12 months: €3.747 million), of which the total gross dividend would be €3.64 million, in accordance with the policy of fund dividend. Taking into account the obligation to maintain minimum cash balances resulting from the particular conditions of the borrowings of the subsidiaries of the Fund and the short-term liquidity needs, the Board of Directors of the Fund proposes to the Board of Governors to pay a dividend greater than the dividend policy of 4.06 million euros (80 cents per share).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
|4th trimester||12 months|
|thousands of euros|
|Cost of sales||-48||-103||-241||-325|
|General and administrative expenses||-1,024||-431||-2,326||-1,597|
|Gain / loss on revaluation of investment properties||4,422||612||6,442||-3,374|
|Other operating income and expenses||-17||-seven||1||-3|
|Other financial income and expenses||-420||-355||-1,678||-1,322|
|Profit before income tax||6,297||2,652||14,851||3,807|
|income tax expense||-942||-342||-1,752||-490|
|Net income for the year||5,355||2,310||13,099||3,317|
|Earnings per share|
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
|thousands of euros|
|Cash and cash equivalents||13,074||5,128|
|Receivables and accrued income||876||2018|
|Total current assets||14,293||7,274|
|Investment property||161,961||144 235|
|Total non-current assets||162 108||144,358|
|LIABILITIES AND EQUITY|
|Debts and installments||1,349||1,995|
|Total current liabilities||9,115||31,022|
|Other long-term debts||987||957|
|Deferred tax liability||5,945||4,583|
|Total non-current liabilities||70,372||49 127|
|Total responsibilities||79,487||80 149|
|Share the capital||50,725||42,225|
|Legal reserve capital||1,489||1,323|
|TOTAL LIABILITIES AND EQUITY||176,401||151,632|
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