Fund Manager's Commentary
In the 1st quarter of 2026, EfTEN Real Estate Fund AS took several significant steps in reshaping the portfolio, focusing on more efficient use of capital and on preparing for new investment opportunities. In March, the fund completed the sale of its subsidiary EfTEN Krustpils SIA (the owner company of the Latvian DSV logistics centre), as a result of which the fund received 5.4 million euros. The fund acquired the logistics centre in June 2016, and the internal rate of return (IRR) of the project amounted to approximately 10%.
After the reporting date, in April 2026, the fund's subsidiary EfTEN Menulio UAB completed the sale of the Menulio 11 office building in Vilnius. The sale price of the investment property was approximately 0.6 million euros higher than book value. The sale of the Latvian DSV logistics centre and the Menulio 11 office building provides a basis for making new investments.
At the fund's general meeting of shareholders held in April 2026, the acquisition of the Magistral shopping centre in Tallinn was discussed. The purpose of the planned transaction is to increase the share of high-quality retail real estate with stable cash flow in the fund's portfolio. The expected acquisition value of the Magistral centre is 31.69 million euros, and the centre's expected net operating income (NOI) is approximately 2.5-2.6 million euros per year. The transaction is planned to be completed in the summer of 2026.
The fund's existing real estate portfolio continued stable operation - vacancy remained low and tenants' payment behaviour was good. The fund continues active management of the real estate portfolio in order to maintain portfolio occupancy, maximize rental income from real estate investments, and ensure the fund's dividend capacity.
The decline of the EURIBOR (compared to the period a year earlier) had a significant positive effect on the fund's cash flows in the first quarter. Interest expenses decreased by 14% on a year-on-year basis, which enabled the fund to increase consolidated net profit faster than rental income. The fund's free cash flow increased by 31% compared to the first quarter of the previous year, and the interest coverage ratio (ICR) improved from 3.4 to 4.4. Although all of the fund's loan agreements bear a floating interest rate, in order to hedge against a potential increase in interest rates the fund has entered into two interest rate swap agreements in the total amount of 22.6 million euros (14.7% of the loan portfolio), under which the 1-month EURIBOR is fixed at levels of 1.995% and 2.2% respectively.
Overview of Financial Results
The consolidated sales revenue of EfTEN Real Estate Fund AS for the 1st quarter of 2026 amounted to 8.421 million euros (1st quarter of 2025: 7.858 million euros). Sales revenue increased by 7.2% compared to the same period a year earlier. The growth in sales revenue was supported by a decrease in vacancy in the office sector, indexation of rental income, as well as new investments in the logistics and care home sectors.
The fund's consolidated net rental income (NOI) in the 1st quarter of 2026 totalled 7.812 million euros (1st quarter of 2025: 7.211 million euros), increasing by 8.3% compared to the same period of the previous year. The net rental income margin in the 1st quarter of 2026 was 95% (2025: 94%), which means that costs directly related to the management of properties (incl. land tax, insurance, maintenance and improvement works) and marketing expenses accounted for 5% (2025: 6%) of the fund's consolidated rental income.
In the 1st quarter of 2026, the fund earned consolidated net profit of 4.924 million euros, which is 18.2% more than in the same period of the previous year.
In the 1st quarter of 2026, the Group generated adjusted cash flow (EBITDA minus interest expenses and repayments of loan principal and income tax expense) in the total amount of approximately 3.5 million euros, which, due to a higher EBITDA level and lower interest expenses, increased by 31% compared to the same period of the previous year. As at 31 March 2026, the total assets of the Group amounted to 407.044 million euros (31 December 2025: 405.851 million euros), incl. the fair value of investment properties accounted for 92% of total assets (31 December 2025: 94%).
Real Estate Portfolio
As at 31 March 2026, the Group had 36 (31 December 2025: 37) commercial real estate investments, the fair value of which as at the reporting date amounted to 373.808 million euros (31 December 2025: 381.032 million euros) and the acquisition cost to 373.912 million euros (31 December 2025: 381.235 million euros). In addition to the above-mentioned investment properties, the Group holds a 50% interest in the joint venture EfTEN SPV11 OÜ, which owns the Palace Hotel in Tallinn, the fair value of which as at 31 March 2026 amounted to 8.688 million euros (31 December 2025: 8.680 million euros).
Investments in the 1st quarter of 2026
In the 1st quarter of 2026, the Group invested a total of 1.776 million euros in the existing real estate portfolio, incl. the continuation of the reconstruction works of the Nõmme care home, the volume of which in the 1st quarter amounted to a total of 1.2 million euros.
Sales in the 1st quarter of 2026
In March 2026, the Group sold a 100% interest in the subsidiary EfTEN Krustpils SIA, which owned the DSV logistics centre in Riga. The Group acquired the DSV logistics centre in June 2016, and the fund earned an internal rate of return (IRR) of approximately 10% from the project. In total, 5.4 million euros were received by the Group from the sale of the subsidiary.
Subsequent to the reporting date, on 17 April 2026, the fund's subsidiary EfTEN Menulio UAB sold the office building owned by it in Vilnius at Menulio 11. The sale price of the investment property was 8.1 million euros, i.e. 571 thousand euros higher than the carrying value of the property. After the repayment of loan obligations taken to acquire Menulio 11 and the settlement of other liabilities, approximately 4.6 million euros will be received by the fund.
The funds obtained from both EfTEN Krustpils SIA and the Menulio 11 office building are planned to be used for the acquisition of the Magistral shopping centre in 2026.
Rental income
In the 1st quarter of 2026, the Group earned a total of 8.181 million euros in rental income, which is 7% more than in the same period in 2025.
As at 31 March 2026, the vacancy rate of investment properties owned by the Group across the portfolio was 3.3% (31 December 2025: 3.2%). Vacancy in the office segment decreased in the first quarter - while the segment's vacancy rate was 14.4% at the end of 2025, it was 13.1% at the end of March. As a significant part of the office segment vacancy consisted of vacant space in the Menulio 11 office building, following the sale transaction of Menulio 11 in April 2026 the segment vacancy rate decreased to 9.5%.
Financing
In the 1st quarter of 2026, two subsidiaries of EfTEN Real Estate Fund AS extended loan agreements concluded with banks in the total amount of 6.7 million euros. Upon the extension of one loan agreement, the loan margin decreased from 2.3% to 1.85%, and upon the extension of the other loan, the terms of the loan agreement remained unchanged. Within the next 12 months, loan agreements of eight subsidiaries of the Group will mature, the outstanding balance of which as at 31 March 2026 amounted to a total of 32.354 million euros. The LTV (Loan-to-Value) of the maturing loan agreements is 34%-59%, and the investment properties have a stable rental cash flow, therefore, in the opinion of the Group's management, no obstacles will arise in extending the loan agreements.
As at 31 March 2026, the weighted average interest rate of the Group's loan agreements was 4.00% (31 December 2025: 3.99%) and the LTV (Loan to Value) was 40% (31 December 2025: 41%). All loan agreements of the fund's subsidiaries are linked to a floating interest rate. To hedge interest rate risk, two subsidiaries of the Group have entered into interest rate swap agreements with a total notional amount of 22.6 million euros, whereby the floating interest rate (1-month EURIBOR) is fixed at levels of 1.995% and 2.2%.
The interest coverage ratio (ICR) of the fund's loans as at 31 March 2026 was 4.4 (as at 31 March 2025: 3.4). The ICR increased mainly due to a lower EURIBOR.
Share information
As at 31 March 2026, the registered share capital of EfTEN Real Estate Fund AS amounts to 115,248 thousand euros (31 December 2025: same). The share capital consisted of 11,524,846 shares (31 December 2025: same) with a nominal value of 10 euros (31 December 2025: same).
The net asset value (NAV) per share of EfTEN Real Estate Fund AS as at 31 March 2026 was 20.75 euros (31 December 2025: 20.32 euros). The net asset value per share of EfTEN Real Estate Fund AS increased by 2.1% over the first three months of 2026.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| 3 months | ||
| 2026 | 2025 | |
| € thousands | ||
| Revenue | 8,421 | 7,858 |
| Cost of services sold | -429 | -506 |
| Gross profit | 7,992 | 7,352 |
| Marketing costs | -180 | -141 |
| General and administrative expenses | -988 | -1,006 |
| Other operating income and expense | -22 | -37 |
| Operating profit | 6,802 | 6,168 |
| Profit / loss from joint ventures | -59 | -58 |
| Loss on sale of subsidiary | -286 | 0 |
| Interest income | 59 | 83 |
| Other finance income and expense | -1,303 | -1,803 |
| Profit before income tax | 5,213 | 4,390 |
| Income tax expense | -289 | -223 |
| Net profit for the reporting period | 4,924 | 4,167 |
| Net comprehensive profit for the reporting period | 4,924 | 4,167 |
| Earnings per share | ||
| - basic | 0.43 | 0.36 |
| - diluted | 0.43 | 0.36 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| 31.03.2026 | 31.12.2025 | |
| € thousands | ||
| ASSETS | ||
| Cash and cash equivalents | 28,903 | 19,957 |
| Short-term deposits | 0 | 320 |
| Derivatives | 248 | 13 |
| Receivables and accrued income | 1,484 | 1,697 |
| Prepaid expenses | 159 | 293 |
| Total current assets | 30,794 | 22,280 |
| Long-term receivables | 142 | 164 |
| Shares in joint ventures | 2,123 | 2,182 |
| Investment property | 373,808 | 381,032 |
| Property. plant and equipment | 177 | 193 |
| Total non-current assets | 376,250 | 383,571 |
| TOTAL ASSETS | 407,044 | 405,851 |
| LIABILITIES AND EQUITY | ||
| Borrowings | 37,631 | 42,261 |
| Derivatives | 0 | 6 |
| Liabilities and prepayments | 2,957 | 2,913 |
| Total current liabilities | 40,588 | 45,180 |
| Borrowings | 112,549 | 111,727 |
| Other long-term liabilities | 1,941 | 1,992 |
| Deferred income tax liability | 12,838 | 12,748 |
| Total non-current liabilities | 127,328 | 126,467 |
| Total liabilities | 167,916 | 171,647 |
| Share capital | 115,248 | 115,248 |
| Share premium | 91,076 | 91,076 |
| Statutory reserve capital | 4,156 | 4,156 |
| Retained earnings | 28,648 | 23,724 |
| TOTAL EQUITY | 239,128 | 234,204 |
| TOTAL LIABILITIES AND EQUITY | 407,044 | 405,851 |
Marilin Hein
CFO
Phone +372 6559 515
E-mail: marilin.hein@eften.ee
