EfTEN Real Estate Fund AS Reports Positive Growth in 2024
The declining euro interest rates are been a boon for the Baltic real estate market, driving increased transaction activity and resulting in improved financial outcomes for EfTEN Real Estate Fund AS. In the third quarter of the year, the fund achieved a significant decline in consolidated interest expenses by more than 60 thousand euros from the previous quarter. This quarter has marked the most robust transaction activity in years for the Fund. Notably, the subsidiary, EfTEN Tähesaju tee OÜ, successfully sold the Tähesaju Hortes property and created two new wholly-owned subsidiaries aimed at acquiring logistics centers in Paemurru and Härgmäe, situated in Tallinn and Harjumaa. The anticipated acquisition cost for these two properties is projected to be close to 15 million euros upon completion.
Market Insights and Future Expectations
The expectation of further falling interest rates continues to bolster investor confidence. This trend has already positively influenced the prices of shares and bonds within the real estate sector across the Scandinavian exchanges. As outlined by the fund manager, positive financing attitudes from Nordic banks operating in the Baltic region create a fertile environment for the recovery of the Baltic commercial real estate sector, which has faced declines in recent years. However, it is important to note that localized major real estate investors currently lack capital, and the anticipated entry of foreign investors into the market remains elusive. Consequently, the market persists in being a buyer's market, providing opportunities to acquire premium real estate at favorable prices.
New Share Issue Announcement
Given the current market conditions, the fund has announced plans to initiate a share issue in the fall of 2024, seeking to raise additional equity of up to 30 million euros. At an extraordinary general meeting, the shareholders bestowed the necessary authorizations to the supervisory board and management for the organization of this substantial share issue.
Financial Overview
For the third quarter of 2024, the consolidated sales revenue of EfTEN Real Estate Fund AS reached 8.006 million euros, reflecting a minor increase from 7.965 million euros reported in the same quarter of the previous year. Over the first nine months of 2024, sales revenue climbed to 23.924 million euros from 23.714 million euros year-on-year. The group’s net rental income remained stable at 22.203 million euros compared to 22.201 million euros in the previous year. Expressively, the group obtained a net profit of 10.104 million euros during this timeframe, representing a marked increase from last year’s figure of 6.880 million euros.
Consolidated Net Rental Income Margin
The consolidated net rental income margin recorded was 93% in the first nine months of 2024, slightly down from 94% in 2023. This indicates that 7% of sales revenue was consumed by expenses directly linked to property management, including land tax, insurance, and maintenance costs.
Asset Performance and Investment Portfolio
As of September 30, 2024, the total asset volume of the group was valued at 377.723 million euros, reflecting a mild decline from 380.944 million euros at the end of 2023. Notably, 96% of this is attributed to the fair value of investment properties. The group possesses 34 commercial investment properties, valued at 358.577 million euros, demonstrating a modest progression since the 357.916 million euros recorded at year-end 2023. Furthermore, the group forged purchase agreements for the Härgmäe and Paemurru logistics centers in September 2024, contributing an advanced payment amounting to 2.173 million euros.
Recent Transactions
In the same period, the Tähesaju Hortes property was sold for 4.675 million euros. Moreover, the group retains a 50% interest in a joint venture owning the Palace Hotel in Tallinn, with a fair value of 8.543 million euros as of September 30, 2024.
Financing Strategies
Datewise data illustrates that during the first nine months of 2024, EfTEN’s subsidiaries, EfTEN Autokeskus OÜ and EfTEN Jurkalne SIA, successfully extended their loan agreements. In the coming 12 months, the expiration of loan agreements is anticipated for two subsidiaries, which currently stand at a total balance of 8.025 million euros as of September 30, 2024. With stable rental cash flows from the investment properties, the management is optimistic about extending these loan agreements without constraint.
Loan Dynamics and Interes Rates
The average interest rate across the group’s loan agreements currently stands at 5.35% as of September 30, 2024, a notable reduction from 5.91% at the end of 2023. All of the fund’s loan agreements are tied to floating interest rates.
Shareholder Information
As of September 30, 2024, the net value of EfTEN Real Estate Fund AS shares was set at 20.15 euros, reflecting a slight decrease from 20.21 euros reported at the end of the previous year. Despite the minor drop, the fund distributed 10.82 million euros in dividends in April 2024. The absence of profit distribution could have resulted in a remarkable 4.6% increase in share value during the past nine months.
Contact Information
For any inquiries, please reach out to:
Marilin Hein
CFO
Phone: +372 6559 515
Email: marilin.hein@eften.ee
Frequently Asked Questions
What is the current state of EfTEN Real Estate Fund's finances?
EfTEN Real Estate Fund reported an increased net profit of 10.104 million euros for the first nine months of 2024, supported by enhanced sales revenue.
How is EfTEN responding to declining interest rates?
The fund is experiencing reduced interest expenses and is optimistic about future financing opportunities, which could foster growth in the commercial real estate sector.
What properties has EfTEN acquired recently?
EfTEN established two new subsidiaries to acquire logistics centers in Paemurru and Härgmäe, with an expected total investment of nearly 15 million euros.
What is the outlook for share value?
Despite a slight decrease in the net share value, EfTEN's dividend payments indicate strong shareholder returns. Further, a lack of profit distribution could boost share value stability.
How is EfTEN managing its loans?
EfTEN's subsidiaries have successfully extended loan agreements and maintain a healthy level of debt management, demonstrating the ability to refinance loans due without difficulty.
