Published: 2020-08-07 21:50:00 CEST
Baltic Horizon Fund / Northern Horizon Capital
Company Announcement

Baltic Horizon Fund Consolidated Unaudited Interim Results for H1 2020

Management Board of Northern Horizon Capital AS (the Management Company) has approved the unaudited consolidated interim financial statements of Baltic Horizon Fund (the Fund) for the first six months of 2020.

Impact of COVID-19 pandemic
At the beginning of 2020, a new coronavirus (COVID-19) started spreading all over the world, which has had an impact on businesses and economies, including in the Baltics.
It is evident that the operating results of Q2 2020 and property valuations were affected by the COVID-19 effects on the tenants’ financial performance and relief measures taken to deal with the pandemic. However based on the currently available information, the Management Company believes that the COVID-19 pandemic should rather have a temporary effect on the Fund’s results and less than was previously expected. Broad portfolio diversification should allow the Fund to limit the COVID-19 impact on the whole portfolio and maintain healthy consolidated operational performance.

The Fund has opted to retain approx. EUR 2.7 million of distributable cash flow for H1 2020 results to strengthen the Fund’s financial position. Over the past two quarters, the Fund has increased its cash distribution reserve to EUR 3.5 million. The Management Company believes that it is in the best interest of the investors and the Fund to reduce its cash distribution at this time in order to protect and strengthen the Fund’s financial position. The management team will continue to actively monitor the economic impact of the pandemic and reassess future distribution levels depending on the upcoming operating results.

On 27 July 2020, S&P Global Ratings affirmed Baltic Horizon Fund “MM3” mid-market rating and removed the Fund from CreditWatch with negative implications, where the Fund was placed on 7 May 2020. The indicative corresponding rating for “MM3” on the global rating scale is “BB+/ BB”.

In summary, it may be concluded that the COVID virus induced lockdown in the Baltics has impacted mainly Baltic Horizon’s centrally located retail and entertainment centres, more specifically increasing their vacancies to approximately 15%. Retail assets located in the central business districts (Postimaja, Europa and Galerija Centrs) accounted for 31.5% of total portfolio NOI in H1 2020.  Overall, the portfolio has remained resilient to the crisis and the total negative effect on the portfolio NOI for the year of 2020 is not expected to exceed 10%.

Distributions to unitholders for Q1 2020 and Q2 2020 Fund results
On 24 April 2020, the Fund declared a cash distribution of EUR 1,701 thousand (EUR 0.015 per unit) to the Fund unitholders for Q1 2020 results. This represents a 1.12% return on the weighted average Q1 2020 net asset value to its unitholders.
On 24 July 2020, the Fund declared a cash distribution of EUR 1,701 thousand (EUR 0.015 per unit) to the Fund unitholders for Q2 2020 results. This represents a 1.14% return on the weighted average Q2 2020 net asset value to its unitholders.

Dividend capacity calculation
 The Fund reduced cash distribution for Q1-Q2 2020 due to COVID-19 outbreak. Generated net cash flow (GNCF) for Q1-Q2 2020 reached EUR 0.054 per unit. 

EUR ’000Q2 2019Q3 2019Q4 2019Q1 2020Q2 2020
(+) Net rental income4,2565,4125,6355,7724,618
(-) Fund administrative expenses(817)(879)(846)(889)(634)
(-) External interest expenses(1,043)(1,295)(1,346)(1,331)(1,327)
(-) CAPEX expenditure1(180)(178)(225)(95)(97)
(+) Added back listing related expenses5160-3929
(+) Added back acquisition related expenses3916---
Generated net cash flow (GNCF)2,306 3,136 3,218 3,496 2,589
GNCF per weighted unit (EUR)0.024 0.031 0.029 0.031 0.023
12-months rolling GNCF yield2 (%)7.8% 8.4% 8.6% 11.5% 9.6%
Dividends declared for the period2,624 3,061 3,175 1,701 1,701
Dividends declared per unit3 (EUR)0.026 0.027 0.028 0.015 0.015
12-months rolling dividend yield2 (%)7.5% 7.8% 8.0% 9.6% 7.2%
  1. The table provides actual capital expenditures for the quarter. Future dividend distributions to unitholders are aimed to be based on the annual budgeted capital expenditure plans equalised for each quarter. This will reduce the quarterly volatility of cash distributions to unitholders.
  2. 12-month rolling GNCF and dividend yields are based on the closing market price of the unit as at the end of the quarter (Q2 2020: closing market price of the unit as of 30 June 2020).
  3. Based on the number of units entitled to dividends.

Net profit and net rental income
In H1 2020, the Group recorded a net loss of EUR 9.5 million against a net profit of EUR 2.3 million for H1 2019.  The net result was significantly impacted by the one-off negative valuation result of EUR 15.8 million during H1 2020. The negative impact of valuation losses on investment properties was partially offset by an increase in net rental income, other operating income and a slight decrease in administrative expenses. Excluding the valuation impact on the net result, the net profit for H1 2020 would have amounted to EUR 6.3 million (H1 2019: EUR 4.8 million). Earnings per unit for H1 2020 were negative at EUR 0.08 (H1 2019: positive EUR 0.03). Earnings per unit excluding valuation gains/losses on the investment properties amounted to EUR 0.06 (H1 2019: EUR 0.05).

In H1 2020, the Group earned net rental income of EUR 10.4 million exceeding the previous year’s net rental income for the same period by EUR 2.2 million (H1 2019: 8.2 million). The increase was achieved through new acquisitions that were made following the capital raisings in 2019. The acquisition of Galerija Centrs and North Star had a significant effect on the Group’s net rental income growth in H1 2020 as compared to H1 2019, albeit rental income growth in Q2 2020 was slower due to relief measures granted to tenants during the COVID-19 pandemic. The addition of Galerija Centrs added EUR 1.8 million to the net rental income for H1 2020, while North Star added EUR 0.7 million.

On an EPRA like-for-like basis, portfolio net rental income decreased by 3.8% year on year mainly due to weaker performance in retail and leisure segments. The decrease was partially offset by the strong performance of the office segment which remained largely unaffected by the lockdown in the Baltic States.  

Portfolio properties in the office segment contributed 54.1% (H1 2019: 56.0%) of net rental income in H1 2020 followed by the retail segment with 41.9% (H1 2019: 37.8%) and the leisure segment with 4.0% (H1 2019: 6.2%). 

Retail assets located in the central business districts (Postimaja, Europa and Galerija Centrs) accounted for 31.5% of total portfolio net rental income in H1 2020. Total net rental income attributable to neighbourhood shopping centres accounted for 10.4% in H1 2020.

During H1 2020, investment properties in Latvia and Lithuania contributed 40.0% (H1 2019: 30.7%) and 33.7% (H1 2019: 38.5%) of net rental income respectively, while investment properties in Estonia contributed 26.3% (H1 2019: 30.8%).

Gross Asset Value (GAV)
At the end of H1 2020, the GAV decreased to EUR 356.8 million (31 December 2019: EUR 371.7 million) which was a drop of 4.0% over the period. The decrease is mainly related to the negative property revaluation of EUR 15.8 million or 3.7% of the portfolio value at the end of 2019. The Group made a small capital investment (EUR 0.1 million) in the Meraki office building development project during Q2 2020. The Fund aims to continue the construction of the Meraki office building throughout 2020 once the extent of the potential impact of the COVID-19 pandemic becomes clearer. The Management Company will continue to actively monitor the economic impact of the pandemic and ensure sufficient liquidity levels during the construction period.

Net Asset Value (NAV)
At the end of June 2020, the Fund net asset value (NAV) decreased to EUR 138.0 million (31 December 2019: EUR 152.5 million) as a result of negative portfolio revaluation which was impacted by the high market uncertainty surrounding the COVID-19 pandemic. Compared to the year-end 2019 NAV, the Fund’s NAV decreased by 9.5%. Eliminating the impact of valuations, the NAV at the end of H1 2020 would have been EUR 153.7 million or EUR 1.3558 per unit. Positive operational performance over the period was offset by EUR 4.9 million dividend distributions to the unitholders and a negative cash flow hedge reserve movement of EUR 0.2 million. At 30 June 2020, NAV per unit stood at EUR 1.2169 (31 December 2019: EUR 1.3451), while NAV per unit based on EPRA standards was EUR 1.3044 (31 December 2019: EUR 1.4333).

Investment properties
The Baltic Horizon Fund portfolio consists of 15 cash flow investment properties in the Baltic capitals and investment property under construction on the Meraki land plot. At the end of Q2 2020, the appraised value of the Fund’s portfolio was EUR 345.5 million (31 December 2019: EUR 358.9 million) and incorporated a total net leasable area of 153,351 sq. m.

The valuation losses on the property portfolio came to EUR 15.8 million during H1 2020 (H1 2019: EUR 2.4 million). Valuations were negatively affected primarily due to downward adjustments to valuation assumptions resulting from the uncertainty associated with the COVID-19 pandemic. Due to global market uncertainty caused by the virus, valuations were reported on the basis of “material valuation uncertainty”. During Q2 2020, the Group invested EUR 0.1 million in the existing property portfolio and an additional EUR 0.1 million in the Meraki development project.

Interest bearing loans and bonds
Interest bearing loans and bonds (excluding lease liabilities) remained at a similar level of EUR 205.7 million compared to year-end 2019 figures (31 December 2019: EUR 205.8 million). Outstanding bank loans decreased slightly due to regular bank loan amortization. Annual loan amortization forms 0.2% of total debt outstanding.

Financial covenants for bonds

Equity Ratio 





Debt Service Coverage Ratio 

> 1.20




  1. On 28 July, the bondholders adopted the decision by the way of written procedure to temporarily reduce the equity ratio bond covenant to 25% or greater, until 31 July 2021

Cash flow
Cash inflow from core operating activities for H1 2020 amounted to EUR 6.7 million (H1 2019:  cash inflow of EUR 6.2 million). Cash outflow from investing activities was EUR 1.7 million (H1 2019: cash outflow of EUR 52.3 million) due to subsequent capital expenditure on existing portfolio properties and investments in the Meraki development project. Cash outflow from financing activities was EUR 7.8 million (H1 2019: cash inflow of EUR 38.8 million). During H1 2020, the Fund made two cash distributions of EUR 4.9 million and paid regular interest on bank loans and bonds. At the end of H1 2020, the Fund had a sufficient amount of cash (EUR 7.1 million) to cover its liquidity needs amid the COVID-19 pandemic.

Key earnings figures

EUR ‘000    Q2 2020Q2 2019Change (%)
Net rental income    4,618 4,256 8.5%
Administrative expenses   (634)(817)(22.4%)
Other operating income   178--
Valuation losses on investment properties (15,749)(2,439)545.7%
Operating (loss) profit    (11,587)1,000 (1,258.7%)
Net financing costs    (1,372)(1,076)27.5%
Loss before tax    (12,959)(76) 16,951.3%
Income tax    149220(32.3%)
Net (loss) profit for the period   (12,810) 144 (8,995.8%)
Weighted average number of units outstanding (units) 113,387,52594,949,76619.4%
Earnings per unit (EUR)   (0.11) 0.00 -

Key financial position figures

EUR ‘000    30.06.202031.12.2019Change (%)
Investment properties in use   342,267356,575(4.0%)
Investment property under construction  3,2742,36738.3%
Gross asset value (GAV)   356,751 371,734 (4.0%)
Interest bearing loans and bonds   205,712205,827(0.1%)
Total liabilities    218,774 219,216 (0.2%)
Net asset value (NAV)   137,977 152,518 (9.5%)
Number of units outstanding (units)   113,387,525113,387,525-
IFRS Net asset value (IFRS NAV) per unit (EUR) 1.2169 1.3451 (9.5%)
EPRA Net reinvestment value (EPRA NRV) per unit (EUR) 1.30441.4333(9.0%)
EPRA Net tangible assets (EPRA NTA) per unit (EUR) 1.30441.4333(9.0%)
EPRA Net disposal value (EPRA NDV) per unit (EUR) 1.21791.3400(9.1%)
EPRA Net asset value (EPRA NAV) per unit (EUR) 1.30441.4333(9.0%)
Loan-to-Value ratio (%)   59.5%57.3%-
Average effective interest rate (%)   2.6%2.6%-

Property performance

During Q2 2020, the average actual occupancy of the portfolio was 96.4% (Q1 2020: 97.6%). Taking into account Duetto I and Duetto II rental guarantees, the effective occupancy rate was 96.4% (Q1 2020: 97.6%). The occupancy rate as of 30 June 2020 was 96.0% (31 March 2020: 97.4%). Although the COVID-19 pandemic had a negative impact on the occupancy rate of the portfolio as a result of some smaller tenants vacating retail premises, the Fund’s tenant base still remains strong. Occupancy rates in the office segment remain at record levels with almost fully occupied premises throughout all Baltic countries (99.9% occupancy).

The average direct property yield during Q2 2020 was 5.3% (Q1 2020: 6.7%). The net initial yield for the whole portfolio for Q2 2020 was 5.2% (Q1 2020: 6.5%). Property yields across the leisure and retail segments took the biggest hit mainly due to the COVID-19 incentives, while the office segment continued to perform well and remained largely unaffected.  The average rental rate for the whole portfolio for Q2 2020 was EUR 11.2 per sq. m.

Property nameSectorFair value1
(EUR ‘000)
(sq. m.)
Direct property yield
Q2 20202
Net initial yield
Q2 20203
Occupancy rate for
Q2 2020
Vilnius, Lithuania      
Duetto IOffice16,2508,5878.0%7.3%100.0%
Duetto IIOffice18,6658,6747.4%7.2%100.0%
Europa SCRetail39,69116,8561.9%1.8%92.8%
Domus Pro Retail ParkRetail16,17011,2475.8%5.5%97.6%
Domus Pro OfficeOffice7,5904,8317.3%6.1%100.0%
North StarOffice19,74310,5506.6%6.8%100.0%
Meraki Development 3,274---
Total Vilnius 121,38360,745 5.3% 5.0% 97.5%
Riga, Latvia      
Upmalas Biroji BCOffice23,00110,4587.3%7.3%100.0%
Vainodes IOffice20,8308,0526.9%7.0%100.0%
LNK CentreOffice16,4907,4536.3%6.4%100.0%
Sky SCRetail4,9603,2547.8%8.1%98.4%
Galerija CentrsRetail71,27720,0223.6%3.6%86.9%
Total Riga 136,558 49,239 5.2% 5.3% 94.6%
Tallinn, Estonia      
Postimaja & CC Plaza complexRetail30,5509,1453.7%4.0%95.6%
Postimaja & CC Plaza complexLeisure14,2508,6644.9%3.8%100.0%
G4S HeadquartersOffice16,7909,1797.9%7.1%100.0%
Pirita SCRetail9,5405,5085.7%7.2%83.4%
Total Tallinn 87,600 43,367 5.6% 5.5% 96.8%
Total portfolio 345,541 153,351 5.3% 5.2% 96.4%
  1. Based on the latest valuation as at 30 June 2020 and recognised right-of-use assets.  
  2. Direct property yield (DPY) is calculated by dividing NOI by the acquisition value and subsequent capital expenditure of the property.
  3. The net initial yield (NIY) is calculated by dividing NOI by the market value of the property.


EUR ‘00001.04.2020-30.06.202001.04.2019-30.06.201901.01.2020-30.06.202001.01.2019-30.06.2019
Rental income5,073 4,646 11,282 8,797
Service charge income1,148 889 2,504 1,652
Cost of rental activities(1,603)(1,279)(3,396)(2,277)
Net rental income4,618 4,256 10,390 8,172
Administrative expenses(634)(817)(1,523)(1,526)
Other operating income178 - 186 6
Valuation losses on investment properties(15,749)(2,439)(15,753)(2,439)
Operating (loss) profit(11,587)1,000 (6,700)4,213
Financial income1 1 2 3
Financial expenses(1,373)(1,077)(2,750)(1,976)
Net financing costs(1,372)(1,076)(2,748)(1,973)
(Loss) profit before tax(12,959)(76)(9,448)2,240
Income tax charge149 220 (8)77
(Loss) profit for the period(12,810)144 (9,456)2,317
Other comprehensive income that is or may be reclassified to profit or loss in subsequent periods
Net losses on cash flow hedges(46)(536)(224)(1,092)
Income tax relating to net gains on cash flow hedges2 391575
Other comprehensive expense, net of tax, that is or may be reclassified to profit or loss in subsequent periods(44)(497)(209)(1,017)
Total comprehensive (expense) income for the period, net of tax(12,854) (353)(9,665)1,300
Basic and diluted earnings per unit (EUR)  (0.11) 0.00(0.08)0.03


EUR ‘00030.06.202031.12.2019
Non-current assets  
Investment properties342,267 356,575
Investment property under construction3,274 2,367
Derivative financial instruments6 73
Other non-current assets54 54
Total non-current assets345,601 359,069
Current assets  
Trade and other receivables3,166 1,794
Prepayments550 301
Other current assets353 734
Cash and cash equivalents7,081 9,836
Total current assets11,150 12,665
Total assets356,751 371,734
Paid in capital138,064 138,064
Cash flow hedge reserve(1,765)(1,556)
Retained earnings1,678 16,010
Total equity137,977 152,518
Non-current liabilities  
Interest bearing loans and borrowings205,604 205,718
Deferred tax liabilities6,011 6,199
Derivative financial instruments1,885 1,728
Other non-current liabilities1,165 1,298
Total non-current liabilities214,665 214,943
Current liabilities  
Interest bearing loans and borrowings405 414
Trade and other payables2,886 3,171
Income tax payable181 8
Other current liabilities637 680
Total current liabilities4,109 4,273
Total liabilities218,774 219,216
Total equity and liabilities356,751 371,734

For more information, please contact: 

Tarmo Karotam
Baltic Horizon Fund manager

The Fund is a registered contractual public closed-end real estate fund that is managed by Alternative Investment Fund Manager license holder Northern Horizon Capital AS. Both the Fund and the Management Company are supervised by the Estonian Financial Supervision Authority.

This announcement contains information that the Management Company is obliged to disclose pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the above distributors, at 22:24 EET on 7 August 2020.


BHF semi-annual report H1 2020.pdf
BHF vahearuanne I poolaasta 2020.pdf