Management Board of Northern Horizon Capital AS has approved the unaudited financial results of Baltic Horizon Fund (the Fund) for the three months of 2024.
Our strategic ambitions
Over the past year, our focus has been on reshaping our strategy to foster sustainable value, concentrating efforts on avenues that promise reliable and consistent growth for our investors. In light of prevailing market conditions, we firmly believe that the execution of the ‘Modern City Life’ strategy, introduced to investors in summer 2023, is paramount to their best interests.
In the coming years, we expect two thirds of the Fund’s NOI to come from centrally located multi-functional assets aligned with our ‘Modern City Life’ strategy. These spaces are meticulously designed to ignite, elevate and enrich the lives of modern citizens and communities. The remaining results are expected to be derived primarily from government-rented premises and select suburban supermarkets and other segments. Our value proposition hinges on quality, flexibility, sustainability, and remarkable service, underpinned by strategic locations tailored to meet the evolving needs of our clientele.
The Fund’s management team has made the strategic decision to implement key performance indicators (KPIs) as a means to effectively measure and track performance. This decision stems from the recognition that clear and measurable benchmarks are essential for evaluating progress towards the Fund’s objectives. By defining specific KPIs, the team aims to enhance transparency, accountability, and decision-making processes.
The focus of the Fund management team is and will be on these major objectives:
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Portfolio occupancy of at least 90% by end of 2024;
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Loan-to-Value target at 50% or lower and repayment of the bonds maturing in 2024;
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To consider disposing of non-strategic assets over the next 18 months;
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Clear ESG and refurbishment strategy for the next 1-2 years with an aim to reach the portfolio’s NOI potential of EUR 18 million by 2027.
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Maintaining 100% BREEAM or LEED certified portfolio.
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Achieving not less than 4 stars from GRESB assessment
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Leasing performance
From a lowest occupancy point in September 2023, we embarked on a determined journey to revitalize the Fund’s leasing landscape and elevate the stature of its portfolio. We have navigated this path, signing approx. 40,000 sq. m. in lease prolongations and in new leases over the past six months, contributing to an increase of occupancy by 7,200 sq. m. This achievement signifies our ascent towards our strategic occupancy ambitions, as we strive to maintain our current clients as well as improve the leasing situation through new partnerships. This resurgence underscores our commitment to securing sustainable, long-term cash flow as we solidify our position as an active player in a challenging environment. These recent successes demonstrate the attractiveness of our properties entering the new real estate growth cycle with rental income gradually increasing over the coming quarters as the tenants move in.
In April, the Fund finalized a significant new cooperation agreement with Apollo Group, the Baltics’ largest entertainment company, for approx. 2,200 sq. m on the 1st floor of Coca-Cola Plaza. With Apollo Group serving as the anchor tenant, this collaboration is poised to establish a dynamic urban lifestyle hub in the heart of Tallinn, offering a diverse range of entertainment, catering, and retail experiences. This 10-year lease agreement, complemented by extended cooperation agreements in the neighbouring Postimaja SC, strategically positions the property to optimize its NOI potential and foster seamless integration with the Rotermann area. The cinema facilities, located on the upper floors, will continue to operate on a long-term basis.
In a challenging market environment characterized by increasing real estate market vacancies across all Baltic states in recent periods, the Fund has demonstrated its adaptability by achieving a net inflow of leases in Q1 2024. This success was primarily attributable to significant deals with established entities in Europa and Meraki. During Q1 2024, the Fund signed new leases for 4,719 sq. m, securing an annual rental income of EUR 857 thousand for future periods. Furthermore, we are pleased to report that 9 new tenants have been attracted to our buildings, while 15 existing tenants have decided to continue their cooperation with us.
Outlook
Given the influence of recent economic and geopolitical events on the operational performance of certain assets and financing costs, Baltic Horizon units are now traded at a price that is more than 60% below NAV. This deviation is not aligned with our standards and is unacceptable to both…
Read More: Baltic Horizon Fund Consolidated Unaudited Results for Q1 2024