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EfTEN real estate funds’ initial financial results for the year 2015

Below we give a brief overview of our three EfTEN’s real estate funds initial, unaudited financial results for the year 2015.

EfTEN Kinnisvarafond AS
Fund was founded: 2009
Total assets: EUR 214,7 m
Investments: 21
Equity: EUR 97,8 m
Sales revenue: EUR 16,5 m (2014 – EUR14,4 m)
Net profit: EUR 12,0 m (2014 – EUR15,2 m)
Including assets (net-) revaluations: EUR 2,4 m (2014 – EUR 6,8 m)
ROIC (return on invested capital): 19,7%
NAV annual growth: 6,3%
Fund status: investment period has ended; holding phase
ROIC is the annual return of equity invested into Fund.
– The modest increase in NAV is due to the dividend payments on Year 2015 in amount of 6,3 million euros, including corporate income tax.

Fund’s financial results were in accordance with management expectations. Fund´s sales revenue increased by 14,4% and EBITDA increased by 13,2%, compared to the previous year. Net profit was 21% lower compared to 2014, which was due to significantly lower revaluation of assets in 2015 compared to year before. Without taking into account the assets revaluations, the Fund´s net profit increased by 16% in year 2015. After the end of the investment period, the Fund will continue managing existing investments and will continue making exits from smaller investments. The Fund focuses on larger assets, which individual value of the asset exceeds EUR 5 million. The Fund´s assets are invested in Estonia 77%, in Latvia 20% and in Lithuania 3%.

EfTEN Kinnisvarafond II AS
Fund was founded: 2015
Total volume of assets: EUR 77 m
Investments: 2
Equity: EUR 37,7 m
Sales revenue: EUR 8,7 m
Net profit: EUR 3,0 m
Including assets (net-) revaluations: EUR 0,0 m
ROIC (return on invested capital): 11,4%
NAV annual growth: 10%
Fund status: active investment period
– ROIC is the annual return on equity invested into Fund.

The Fund acquired in January 2015 the Radisson Blu Sky Hotel in Tallinn with office building and former Madisson pub (currently Reval Cafe). In December 2015 the Fund acquired a core office building in Riga, Duntes 6. The vast majority of the year 2015 financial results consist of the hotel financial results. Duntes office building financial impact was small because the object was acquired in the last month of the year. The Fund holds a 100% ownership in the hotel operating company and hotel results in total are consolidated in balance sheet of the Fund. EfTEN Kinnisvarafond II is mainly targeted at institutional investors and is core and core plus investment strategy based real estate Fund. The Fund´s assets are invested in Estonia 66% and in Latvia 34%.

EfTEN Real Estate Fund III AS
Fund was founded: 2015
Total volume of assets: EUR 39,6 m
Investments: 2
Equity: EUR 15,4 m
Sales revenue: EUR 1,2 m
Net profit: EUR 1,5 m
Including assets (net-) revaluations: EUR 1,1 m
ROIC (return on invested capital): 11,2%
NAV annual growth: 11,2%
Fund status: active investment period
– ROIC is the annual return on equity invested into Fund.

The Fund began operating in July 2015, by undertaking the public offering of the shares in Estonia. In total 160 investors participated in the Funds initial public offering. The Fund made its first investment in August 2015, by acquiring Saules Miestas shopping centre in Šiauliai, Lithuania from E.L.L Kinnisvara. In December 2015, the Fund acquired second object in Lithuania – Ulonu office building in Vilnius. Fund´s return indicators are modest because the Fund received cash flows in 2015 during the five months of operations only. The Fund invested in two objects in Lithuania almost all of the equity, which was raised during the public offering. The second share emission is planned to conduct at the end of March or beginning of April 2016. The Fund has a value added and opportunistic investment strategy.

Summary

Fund managers are certainly pleased with last year financial results of each of our managed Fund. The current conservative investment policy, good mix of assets and the extremely favourable interest rate environment has ensured a good commercial performance of the Funds. In addition, we consider it to be very important to have the Fund management company represented in all Baltic states as real estate is very local business. EfTEN employs 17 people in Estonia, 9 in Latvia and 7 in Lithuania. Upcoming, year 2016, we expect a continuation of a similar pace assuming that the macroeconomic picture in Baltic region won´t have unexpected market turbulence. Both of our Funds, to institutional investors targeted Fund II as well as to retail investors targeted Fund III plans this year to carry out new share issues, to continue investing. Given the rapid post-crisis recovery of real estate prices, we will not make any predictions for the pace of investments, we will proceed according to our successful conservative investment principles.

Viljar Arakas
EfTEN Capital CEO, real estate fund manager