UPP & CO Kauno 53 OÜ Consolidated Audited 2022 Annual Report
Management report
The parent company UPP & CO Kauno 53 OÜ (hereinafter together with its subsidiaries referred to as the Group) was formed for the acquisition and management of investment property and for raising capital for this transaction.
In 2017, the company acquired a 100% ownership interest in the company Promalita UAB, incorporated in the Republic of Lithuania, which owns a logistics centre near Vilnius. The net floor area of the centre is 21,232 m2 and it is fully leased out. The Rimi retail chain is the anchor tenant.
On 21 February 2022, the subsidiary Promalita UAB extended the lease with Hakonlita UAB to the year 2031. Hakonlita UAB is the anchor tenant of the logistics centre owned by Promalita UAB, accounting for 93% of the revenues of the logistics centre. Parties are entitled to prematurely terminate the lease from May 2026. Promalita UAB also assumed an obligation to conduct a technical audit of the building, carry out urgent repairs and invest EUR 100,000 in energy efficiency measures during the upcoming financial year.
On 30 March 2022, Promalita UAB extended its loan agreement with OP Corporate Bank plc Lithuania Branch until the year 2027. The loan amount was left unchanged and the margin increased from 1.75% to 1.91% due to an increase in borrowing cost at the bank.
The Group’s revenue for the financial year was EUR 1,277,056 (2021: EUR 1,309,432). The Group has no employees and therefore pays no employee salaries, however it remunerates its Management Board members. Such expenses including taxes amounted to EUR 448 (2021: EUR 390) for the year, no other benefits were granted.
The building is at full occupancy, all payments from customers are received on time and the Group has duly settled its liabilities as at the year-end.
The Group sees the macroeconomic environment as uncertain due to high inflation and increasing interest rates. Finance costs are the primary driver of the Group’s expenses and even though the outstanding bonds bear a fixed rate of interest, the bank loan of Promalita UAB is at an interest rate tied to the Euribor, which has significantly increased finance costs for the subsidiary. During the period of low interest rates the Group accumulated excess capital and substantially paid down its bank loan, therefore the increase in Euribor will affect the Group’s profit and liquidity but these developments will not pose any going concern risk to the Group. The Group is well-capitalised.
A rising Euribor rate impacts the discount rate of future cash flows, which will presumably lead to a halt in the growth of investment property value in the next financial year and, depending on how high Euribor will rise and how long a high Euribor will persist, there may also be some decline in value. The Group last appraised the value of investment property in March 2022 and then it was appraised at more than it stood in March 2021. The Group aims to appraise its investment property again at the end of 2023.
As the Group was formed solely to operate this business, no structural change in business is planned for the financial year following the reporting year. The group has also not assumed liabilities or issued guarantees that may materially impact the results of future financial years.
UNITED PARTNERS
Siim Sild
Managing Director
+372 5626 0107
siim.sild@unitedpartners.ee
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