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2017 first half-year financial results for EfTEN real estate funds
2017 first half-year consolidated turnover for EfTEN Real Estate Funds was EUR 23 million (2016: EUR 16.4 million). Total net profit for the funds was EUR 15.2 million, which is 45% higher than that of the 2016 first half-year, when net profit was EUR 10.5 million. Net profit was comprised of the increase/decrease in fair (net) value of assets in the amount of EUR 3.6 million (2016: EUR 2.7 million) i.e. the increase/decrease in fair (net) value of assets was proportional to that of last year. In comparison with a year ago, the gross asset volume of the funds increased by 31%, thanks to new investments, to EUR 496 million.
| EfTEN Kinnisvarafond AS | |
| Fund’s year of founding | 2009 |
| Gross asset volume: | 212.6 million € |
| Number of investments: | 18 |
| Owner’s equity: | 109.5 million € |
| Sales revenue: | 8.5 million € |
| Net profit: | 5.8 million € |
| incl. increase/decrease in fair (net) value of assets: | 900,000 € |
| Net yield | 7.5 % |
| ROIC (return on invested capital)1: | 22.7 % |
| Status of the fund: | investment period has ended; holding phase |
1 ROIC is the total annual rate of return on the equity invested
In the first half-year of 2017 EfTEN Kinnisvarafond made two successful exits, selling the Narva Prisma and Stabu 10 in Riga. The annual rate of return on invested equity on both sold projects was over 20%. The Fund is continuing investment activity with already existing objects. Expansion construction work on the RAF Centre, located in the city of Jelgava, is already underway. Expansion work on the Viljandi UKU is set to begin in the fourth quarter of the current year. In addition, there are plans to begin construction of a DEPO building materials store in Jelgava, and to perform a thorough renovation of the Pärnu mnt 105 office building in Tallinn.
| EfTEN Kinnisvarafond II AS | |
| Fund’s year of founding: | 2015 |
| Gross asset volume: | 196.4 million € |
| Number of investments: | 4 |
| Owner’s equity: | 95.7 million € |
| Sales revenue: | 10.9 million € |
| Net profit: | 5.4 million € |
| incl. increase/decrease in fair (net) value of assets: | 900,000 € |
| Net yield: | 7.5% |
| ROIC (return on invested capital)1: | 15.8% |
| Status of the fund: | active investment phase |
1 ROIC is the total annual rate of return on the equity invested
EfTEN Kinnisvarafond II is mainly focused on the reconstruction works being performed on Domina, one of the biggest shopping centres in Riga. The first stage of reconstruction work was completed in March 2017, with 25 new shops, among them SportsDirect and JYSK, opening their doors in the centre. In August there are plans to open a Maxima XXX grocery supermarket, after which the reconstruction works which began last year will have been successfully completed.
| EfTEN Real Estate Fund III AS | |
| Fund’s year of founding: | 2015 |
| Gross asset volume: | 87.0 million € |
| Number of investments: | 8 |
| Owner’s equity: | 39.1 million € |
| Sales revenue: | 3.5 million € |
| Net profit: | 4.0 million € |
| incl. increase/decrease in fair (net) value of assets: | 1.9 million € |
| Net yield: | 7.6 % |
| ROIC (return on invested capital)1: | 27.6 % |
| Status of the fund: | active investment phase |
1 ROIC is the total annual rate of return on the equity invested
EfTEN’s third fund carried out the third successful public share emission in the history of the fund. Shares were offered exclusively to the fund’s current shareholders. The EUR 6.3 million emission was oversubscribed by 3.8 times. Following the successful emission the fund acquired the Hortes garden centre property in Laagri, Tallinn. In addition, the fund acquired full ownership in a SPV that is building a Selver supermarket at the address Pärnu mnt 554, Tallinn. The new Selver supermarket, which will begin serving the Laagri area, will be completed in December 2017. In August 2017, the fund’s largest investment – facade renovation works on the Saules Miestase shopping centre located in Šiauliai, Lithuania – will end, and in the first half-year of 2018 the thorough reconstruction of DSV’s Riga logistic centre will be completed.
Fund manager comments: we are very satisfied with the financial results of EfTEN’s three funds – the results correspond to our high expectations. We are especially pleased with our two successful exits. To date, EfTEN Capital has successfully sold a total of nine single investments from our first fund, EfTEN Kinnisvarafond AS. As fund managers, we consider it important to exit from previously acquired assets in the case of a suitable offer, and not to wait for the fund’s deadline.
The second half-year for the funds will be full of activity – in addition to the three funds daily activities, there are expansion works underway or soon to begin involving a total of nine investments, including the construction of a building from scratch. We believe that the second half-year will bring two additional new projects, in which a building that will be leased for the long-term will be constructed from scratch. In a situation in which the prices of completed commercial buildings that are earning a stable cash flow are setting new records, we see an opportunity for EfTEN’s investors to add value through real estate development activity with moderate risk.
Viljar Arakas, 24. July 2017