Introduction to Baltic Horizon Fund
The Management Board of Northern Horizon Capital AS has recently established the unaudited financial results for the Baltic Horizon Fund (the Fund) for the nine months of 2024. This analysis will delve into the Fund's strategic aspirations, leasing performance, financial results, and outlook for the final quarter of 2024.
Strategic Ambitions of the Fund
Over the past year, our strategic focus has shifted toward fostering sustainable growth in alignment with the ‘Modern City Life’ strategy, which was presented to our investors in the previous year. This strategy is essential as we navigate the current market dynamics.
We predict that two-thirds of the Fund's Net Operating Income (NOI) will generate from centrally located, multifunctional assets designed to enhance modern urban living. Our commitment to quality, flexibility, and sustainability drives our value proposition in meeting the evolving demands of our clients.
Key Objectives for the Coming Year
The management team has established ambitious targets, including:
- Achieving at least 90% portfolio occupancy by 2024 year-end.
- Maintaining a Loan-to-Value (LTV) ratio of 50% or less.
- Considering the disposal of non-strategic assets within the next 18 months.
- Implementing a clear ESG and refurbishment strategy with a target NOI of EUR 18 million by 2027.
- Ensuring all properties are 100% BREEAM or LEED certified.
- Securing a minimum of 4 stars in the GRESB assessment.
As of now, we have made significant strides in repaying the short-term bonds that matured recently, and we are actively working on the next steps to further reduce our LTV.
Leasing Performance Highlights
Despite a challenging environment with increasing vacancy rates across the Baltic real estate markets, the Fund demonstrated resilience by renewing a considerable number of leases and attracting new tenants. This success is largely due to partnerships with anchor tenants such as Narbutas and Apollo Group.
In total, the Fund secured new leases covering approximately 17,985 square meters, generating an annual rental income of EUR 2.23 million for future periods. Surprising over 41 new tenants confirmed their collaboration, along with 48 existing clients renewing their agreements.
Occupancy Rate Progress
By September 2024, we achieved 80% of our target lease agreements, moving closer to fulfilling our 90% occupancy goal. With letters of intent secured for about 3,700 square meters, we are optimistic about exceeding the occupancy benchmarks.
Financial Overview and Outcomes
The Baltic Horizon Fund faced a net loss of EUR 13.4 million during the first three quarters of 2024, a marked improvement from the EUR 15.2 million loss recorded in the same timeframe in 2023. This improvement stems mainly from a lesser property valuation loss.
Net rental income reached EUR 8.9 million in 2024, a decline from EUR 11.7 million the previous year. This decrease can be attributed to property sales in the preceding year, affecting operational income.
Key Financial Figures
The Fund's major financial indicators include:
- Total asset value at EUR 256.8 million as of late September 2024.
- Investment properties valued at EUR 241.6 million, showing a decrease from previously reported values.
- Net Asset Value (NAV) standing at EUR 101.9 million.
We are determined to improve our financial standing through consistent management strategies and adapt to the unfolding market conditions.
Future Outlook
The approach going into Q4 2024 will center around enhancing occupancy across our portfolio while efficiently addressing our bond repayment strategy. The current economic landscape, influenced by geopolitical events, has resulted in the trading price of Baltic Horizon units being significantly below their Net Asset Value (NAV).
To remedy this disconnect, the Fund is honing in on fortifying our retail portfolio, welcoming new anchor tenants, and creating engaging concepts that enrich the tenant experience.
Commitment to Sustainability
Achieving 100% BREEAM certification across our portfolio underscores our commitment to sustainability. The incorporation of green lease clauses within our agreements further highlights our dedication to responsible property management.
The Fund is also committed to improving debt service and reducing leverage levels to bolster our financial position in light of ongoing market uncertainties.
Frequently Asked Questions
1. What is the Baltic Horizon Fund?
The Baltic Horizon Fund is a closed-end real estate investment fund aimed at generating stable returns for its investors through investments in income-generating properties in the Baltic region.
2. What is the significance of the ‘Modern City Life’ strategy?
The ‘Modern City Life’ strategy focuses on sustainable development in urban areas, anticipating future demands and creating multi-functional living spaces.
3. How is the Fund performing in terms of leasing?
Despite market challenges, the Fund has successfully renewed many leases and attracted new tenants, with significant progress toward achieving its occupancy goals.
4. What are the key financial highlights for 2024?
As of Q3 2024, the Fund reported a net loss of EUR 13.4 million and total assets valued at EUR 256.8 million.
5. How does the Fund prioritize sustainability?
The Fund is focused on achieving BREEAM certification for its properties and integrating green lease clauses to support sustainable practices and environmental responsibility.
