Fund Manager’s Insights on the Q2 Performance
In the second quarter of 2025, the Baltic commercial real estate sector demonstrated trends consistent with those observed over the last few quarters. The volume of transaction activity remained subdued, primarily arising from a scarcity of equity capital, and only modest economic growth led to the entry of new significant tenants into the marketplace. A silver lining, however, emerged with the continued decline in EURIBOR, which has subsequently eased borrowing costs.
Amid intensified competition within the tenant market, EfTEN Real Estate Fund AS successfully reduced its portfolio vacancy rate by 0.7 percentage points to an impressive 3.7%. The retail segment saw the introduction of new tenants, and somewhat encouraging signs began to surface in the Estonian office sector after an extended period of stagnation. Conversely, the lofty volume of recent developments has persisted in burdening the Vilnius office market. Notably, the Paemurru logistics center within the fund's portfolio was finalized in Q2, alongside the completion of Block C at the Valkla elderly home, contributing to a sales revenue uptick of 4.5% compared to Q1 and a year-on-year increase of 3.1%.
Financial Performance: An In-depth Overview
EfTEN Real Estate Fund AS reported consolidated sales revenue of €8.210 million for Q2 2025, up from €7.957 million in Q2 2024. For the first half of the year, the fund's consolidated revenue amounted to €16.068 million (previous year: €15.918 million), reflecting a 3.1% increase in Q2 and 1.0% growth for H1. This revenue growth was bolstered primarily by new investments in the logistics and elderly care sectors.
For H1 2025, the fund's consolidated net operating income (NOI) reached €14.845 million, a slight year-on-year rise from €14.781 million. The NOI margin, however, saw a slight contraction to 92% from last year’s 93%, suggesting that property-related costs—including land tax, insurance, maintenance, and marketing—constituted 8% of revenue in H1 2025 (2024: 7%).
During Q2 2025, the fund posted a consolidated net profit of €4.025 million, up significantly from €2.442 million a year prior. This profit increase primarily resulted from a favorable change in the fair value of investment properties, which sat at €546 thousand in June 2025, contrasting with a revaluation loss of €1.454 million during the same timeframe in 2024. Additionally, a decrease in interest expenses attributed to the declining EURIBOR positively impacted quarterly profits, reducing interest costs to €1.697 million from €2.237 million in the previous year.
As of June 30, 2025, the consolidated net profit for the first half of the year reached €8.192 million, up from €6.250 million in H1 2024, supported by a year-on-year reduction in interest expenses of €973 thousand, or 22%.
Exploring the Real Estate Portfolio
As of June 30, 2025, the Group held a total of 37 commercial real estate investments (up from 36 in December 2024) valued at €382.018 million, compared to €373.815 million previously, with an acquisition cost of €378.218 million. Additionally, the Group retained a 50% interest in a joint venture owning the Palace Hotel in Tallinn, with a fair value consistent at €8.630 million.
In the first half of 2025, investments totaled €7.657 million, directed towards both new properties and the development of the existing real estate portfolio. Notably, in March, EfTEN Hiiu OÜ acquired a property at Hiiu 42 in Tallinn for €4 million, which is partially occupied by the North Estonia Medical Centre Foundation and is set to undergo redevelopment into a general elderly home named 'Nõmme Südamekodu', with a capacity of 170 residents.
The first half of 2025 also saw the completion of Block C at the Valkla elderly home and the initiation of phase II construction at the Ermi elderly home in Tartu. Furthermore, the Paemurru logistics center was successfully completed, with an investment of €1.743 million in additional costs during this time.
During these six months, the Group's total rental income amounted to €15.571 million, marking a 1% increase from the corresponding period in 2024. However, as of June 30, 2025, the vacancy rate for investment properties climbed to 3.7%, compared to 2.6% at the close of December 2024, particularly influenced by the office segment's vacancy rate of 16.2%, which increased due to prolonged leasing durations.
Funding and Financial Position
In April 2025, subsidiaries of EfTEN Real Estate Fund AS raised their total bank loan commitments by €7.32 million, enhancing their financial capacity. Additionally, €2.67 million in bank financing was utilized in the first half of the year for constructing the Valkla elderly home and the Paemurru logistics center. One subsidiary, EfTEN Hiiu OÜ, entered into loan agreement negotiations for €3.25 million aimed at funding the redevelopment of the building at Hiiu 42, with no disbursements made by the end of June.
Upcoming months mark the maturity of loan agreements across eleven subsidiaries, with a total outstanding balance of €40.641 million. The Loan-to-Value (LTV) ratios of these loans vary from 37% to 46%, and the associated investment properties have generated stable rental cash flow, ensuring fruitful refinancing prospects. As such, management shows confidence there will be no hurdles to refinancing these commitments.
By the end of June 2025, the Group’s average interest rate on loan agreements was 3.95%, down from 4.89% as of December 2024. The overall LTV ratio stood at 41%. As all loan agreements for the subsidiaries are based on floating interest rates, to counteract interest rate risks, one subsidiary completed an interest rate swap agreement in June 2025, locking in the 1-month EURIBOR at a rate of 1.995%.
The fund’s interest coverage ratio also showed notable improvement, reaching 3.7 as of June 30, 2025, greatly attributed to the decrease in EURIBOR.
Shareholders and Equity Information
As of June 30, 2025, the registered share capital of EfTEN Real Estate Fund AS maintained at €114,403 thousand, comprised of 11,440,340 shares, each possessing a nominal value of €10. The net asset value per share stood at €19.98, reflecting a slight 1.9% decrease during the first half of 2025. Excluding any dividend distributions, net asset value would have increased by 4.1% over the same timeframe.
Moreover, ownership among the fund's board and management, along with related individuals, represented 32.18% of shares by this date.
Frequently Asked Questions
What are the key highlights of EfTEN Real Estate Fund AS's Q2 2025 results?
The fund experienced growth in sales revenue and reduced its vacancy rate, signaling successful operational performance despite broader market challenges.
How did the EURIBOR impact the fund's financial performance?
A decline in EURIBOR significantly lowered interest expenses, boosting the fund's net profit during Q2 2025 compared to the previous year.
What areas are driving the fund's revenue growth?
New investments in logistics and elderly care sectors have been vital in driving revenue, contributing to consistent financial performance.
What changes were made regarding the fund's loan agreements?
The fund renewed its bank loan commitments and executed interest rate swap agreements to manage interest rate risks effectively.
How does the fund's real estate portfolio look as of mid-2025?
The fund's portfolio consists of 37 commercial properties valued at €382.018 million, showcasing strategic growth and ongoing investment in key sectors.
