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Eastnine — Interim / Quarterly Report 2020
Feb 17, 2021
3037_10-k_2021-02-17_d11ca601-acd9-4571-b55e-e94e38803237.pdf
Interim / Quarterly Report
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Year-end report 2020
Eastnine demonstrates highest profit ever after a considerable increase in profit from property management as well as positive unrealised value changes in properties and investments. Growth in the property portfolio accounts for the increasing profit, with contributions from higher rent levels and economies of scale.
The period January-December 2020
- Rental income increased by 44 per cent to EUR 19,186k (13,348). The increase is primarily attributable to a larger property portfolio, but also due to a higher rent level. In a comparable portfolio, rental income increased by 5 per cent.
- Net operating income increased by 46 per cent to EUR 17,497k (11,946).
- Profit from property management increased by 82 per cent to EUR 10,011k (5,489).
- Unrealised value changes amounted to EUR 30,044k (26,944). Of this change, EUR 17,383k (10,208) is attributable to real estate, EUR 13,443k (17,742) to investments and EUR -782k (-1,006) to derivatives.
- Profit/loss for the year amounted to EUR 36,155k (35,266), corresponding to EUR 1.70 per share (1.66).
- The average rent level amounted to EUR 14.9 per sq.m. per month (14.7) and the occupancy rate to 92.6 per cent (92.7). Net letting amounted to EUR -771k. The average rent level on newly signed agreements amounted to EUR 15.7 per sq.m. per month, and on renegotiated agreements to EUR 15.3.
• The Board of Directors proposes a dividend of 3.00 SEK per share (2.70), with payments distributed evenly on four occasions in May, August and November 2021, and February 2022.
Key events during the fourth quarter
- Unrealised value changes amounted to EUR 36,869k (16,534) in the fourth quarter, of which EUR 14,997k (3,914) is attributable to real estate, EUR 21,981k (11,918) to investments and EUR -109k (702) to derivatives.
- The property Vertas-1 in Vilnius obtained LEED Platinum certification.
- A new business plan and new targets were established. The property portfolio shall double, reaching a total of EUR 700m, by the end of 2023.
- One million repurchased shares were sold. The resulting cash is to be used for property acquisitions.
- Eastnine reached the top 20 percentile and received five stars in GRESB's annual sustainability rankings of real estate companies globally.
Events after year-end
• No significant events have occurred after the end of the year.
| 2020 | 2019 | 2020 | 2019 | |
|---|---|---|---|---|
| SELECTED KEY FIGURES | Jan-Dec | Jan-Dec | Oct-Dec | Oct-Dec |
| Rental income, EURk | 19,186 | 13,348 | 5,251 | 4,161 |
| Profit from property management, EURk | 10,011 | 5,489 | 3,061 | 1,699 |
| Profit from property management per share, EUR | 0.47 | 0.26 | 0.14 | 0.08 |
| Net profit/loss for the period, EURk | 36,155 | 35,266 | 37,504 | 19,575 |
| Earnings per share, EUR | 1.70 | 1.66 | 1.73 | 0.93 |
| Return on equity, % | 12.5 | 13.9 | 52.5 | 30.3 |
| 2020 | 2020 | |
|---|---|---|
| SELECTED KEY FIGURES | 31 Dec | 31 Dec |
| Loan-to-value, % | 36 | 36 |
| Loan-to-value, properties, % | 46 | 47 |
| Sustainability-certified properties1 , % of sq.m. |
87 | 72 |
| Long-term NAV per share, EUR | 14.6 | 13.1 |
| Long-term NAV per share, SEK2 | 147 | 137 |
Comparative figures in the Interim Report refer to the period January - December 2019 in income statement items and as per 31 December 2019 in balance sheet items. "The Company" refers to the Eastnine Group. 1 Sustainability-certified area in proportion to total area (excluding area expected to undergo significant redevelopment). 2 EUR = 10.05 SEK as of 31 December 2020 (source: Reuters).
This is Eastnine
Eastnine shall be the leading long-term provider of modern and sustainable office premises in prime locations in the Baltic capitals.
Swedish real estate company
The Company is listed on Nasdaq Stockholm Mid Cap and headquartered in Stockholm.
Nordic tenants
Tenants are primarily large and stable Nordic companies with international operations.
High-yielding, prime office properties in the Baltics
Invests in modern, sustainable and high-yielding office properties in first-class locations in the Baltic capitals.
TARGETS IN BUSINESS PLAN 2023
| Operational | Status 31December 2020 |
|---|---|
| Property portfolio of at least EUR 700m by the end of 2023. | EUR 372m |
| Profit from property management for Q4 2023 (recalculated as annual figure) to amount to EUR 25m. | EUR 12.2m (annualised Q4 2020) |
| Financial | |
| Dividends are to correspond to at least 50 % of profit from property management less current tax over time. | 66 %1 |
| Return on equity should be at least 10 % over time. | 12.5 % (2020) |
| The loan-to-value ratio on properties should be at most 60 %. | 46 % |
| Equity/asset ratio should be at least 35 %. | 62 % |
| Sustainability | |
| The entire property portfolio should have obtained sustainability certificates on the level of at least LEED Gold or BREEAM Excellent 2 |
87 % |
1Calculated on the Board's proposal of a dividend of 3.00 SEK per share. 2 Refers to area of all properties that are not expected to undergo significant redevelopment.
Highest profit ever
Earnings in 2020 reached record levels after a considerable increase in profit from property management and large positive unrealised value changes to properties as well as to the investment in Melon Fashion Group (MFG). The coronavirus pandemic has impeded and delayed some transactions, but has only caused minor loss of revenue. In accordance with the new business plan, our growth trajectory is set to continue in 2021.
New earnings record
Eastnine presents record earnings in 2020. The profit from property management has nearly doubled and unrealised value changes, in properties as well as in MFG, amount to considerable sums. Naturally, a large part of the increase in profit from property management is attributable to growth in the property portfolio, but there are also evident economies of scale contributing. Out of the increase in rental income this year, 95 per cent went straight to net operating income and 77 per cent to the profit from property management. The impact of economies of scale is also evident when comparing the increase in rental income, amounting to 44 per cent, with the change in profit from property management, which increased by 82 per cent. This is the reason why continued growth in Eastnine's property portfolio is so important. In 2020, the Board of Directors decided on a new plan for the coming three years, establishing that the property portfolio is to be doubled in order to attain the over-arching goal of delivering high total return to the shareholders.
Limited rent losses
The pandemic resulted in considerable challenges, not least in the initial stages, as nobody knew what to expect neither in extent nor time. Some businesses, like restaurants, are still affected by lockdowns throughout the fourth quarter. Eastnine has weathered the pandemic well, thanks to our first-rate product in good markets, stable customers with long leases as well as our own, dedicated staff. All the same, the pandemic has meant that it has taken longer to fill vacant premises, even if the vacancies are not always a result of the pandemic.
Growth despite restrictions
Travel restrictions resulting from the pandemic has meant that property transactions take longer to complete than usual. Fortunately, we know these markets well, know which properties are interesting and have local staff on site, meaning that we could successfully take possession of both S7-3 and Vertas-2 in Vilnius during the year. Competition for the best office properties has intensified, however, as foreign investors have increased their presence. This has meant that the yield requirements on prime office properties continue to decline in Riga and Vilnius, boosting the value of our property portfolio. In total, the value of our property portfolio has increased by EUR 82m reaching EUR 372m.
Pandemic causing delays to focusing efforts
The pandemic has slowed Eastnine's efforts to focus our assets on directly owned real estate. Currently, only two non-real-estate assets remain: holdings in the Russian fashion outlet chain MFG as well as holdings in a real estate fund. Both holdings are unburdened. Efforts to find a gainful exit continues in 2021. MFG has weathered the pandemic very well, resulting in a positive unrealised value change in 2020. At present, the combined value of the holdings in MFG and the real estate fund amount to roughly EUR 100m.
Top-rated sustainability
During the coronavirus pandemic, with restrictions in some areas, more time has been available to develop other parts of the business as e.g. sustainability, and as such, it's particularly pleasing to see these efforts generate results. We have achieved a top placement in GRESB's global annual ranking of sustainability in real estate, the Great Place to Work employee survey, Cicero's ranking of our green financing framework as well as the Allbright Foundation's ranking of gender equality in Swedish listed companies. We have continued to build up our organisation and now employ 22 people. Even though our different offices have been all but unable to meet in person, we have still managed to keep our spirits high. Like many others, we have successfully implemented different solutions and even a digital kick-off conference, which worked so well we'd be keen to do it again.
Refined message
We have also refined our communications and our messaging by launching a new visual profile, updating the looks of our financial reports as well as of our website. Communications is an essential part of success. It's not enough to simply deliver strong performance; these results have to be communicated in the right way, as well. As the company and our property portfolio grows, more people are paying attention.
Future prospects
We are proud of the achievements we've made, and will continue our passionate efforts in 2021. We have a number of vacancies to fill; construction of the Pine in Riga, the Baltics' first wooden office building, will begin; and many interesting acquisition opportunities are to be evaluated - so that our growth journey can continue.
Kestutis Sasnauskas, CEO
We are proud of the achievements we've made, and will continue our passionate efforts in 2021
Effects of the coronavirus pandemic
The coronavirus pandemic has had a limited impact on Eastnine in 2020. Only minor rent reductions have been granted, although an increase was noted in the fourth quarter in conjunction with the second wave of the pandemic. The value of properties and of MFG have increased due to lower yield requirements on properties and expectations of good sales development for MFG, respectively.
Rental income
Eastnine has a robust tenant structure. The majority of Eastnine's tenants are large Nordic companies with international operations. The average remaining lease term of the ten largest tenants is 5.1 years, and across the portfolio the corresponding number is 4.4 years. 95 per cent of the premises are offices.
Rent payments on Eastnine's leases are chiefly due on a monthly basis, meaning that any tenants that may face difficulties in paying their rent are quickly identified. In the fourth quarter of 2020, as a second coronavirus wave affected the world and the Baltics, there was an increase in granted rent reductions. Eastnine has granted reductions totalling around EUR 280k, corresponding to 1.5 per cent of total annual rent income, up to and including December 2020. Restaurants and smaller tenants that have been affected by lockdowns dominate the list of tenants that have been granted reductions.
Restrictions and a general caution due to the coronavirus pandemic have caused difficulties in arranging showings of empty premises, meaning that it has taken longer than usual to let out vacant premises.
Financing
Eastnine enjoys good liquidity and a high equity/asset ratio. Cash and cash equivalents amounted to EUR 24m, unutilised credit facilities to EUR 3m and the equity/asset ratio to 62 per cent at the end of the year.
The loan-to-value ratio on properties amounted to 46 per cent and the total loan-to-value ratio to 36 per cent. The average capital tie-up period was 3.0 years and the fixed interest term 2.3 years. Financing is distributed between three of the larger banks in the Baltics, and the Company does not use any capital market financing.
Transaction and property valuations
Travel restrictions, in combination with an at times high level of market anxiety, mean that transactions have taken longer than usual to complete. The yield requirement for prime office properties has continued to decline in Riga and Vilnius, among other things due to an increased interest from international investors.
All of Eastnine's property portfolio has been externally valued as of 31 March 2020 and internally valued as of 30 June. Since then, a few properties have been externally valued every quarter, and others internally valued using the same valuation model. During the year, unrealised value changes on properties amounted to EUR 17,383k, corresponding to 6.0 per cent of opening property values. The value at the end of the period was EUR 372,400k.
Melon Fashion Group
Eastnine's associated company MFG has developed very well after an initially negative impact from the coronavirus pandemic, as all stores were closed in the spring. A positive sales development in retail stores as well as in e-commerce has contributed to an increase in the value of Eastnine's holdings by EUR 12,423k, corresponding to 19 per cent, in 2020. At the end of the year, the holding was valued at EUR 79,320k. A decrease in the value of the RUB has negatively affected the value of Eastnine's holding.
Staff
The health and safety of our staff is a priority. Eastnine follows the official guidelines for working and staffing in the countries in which we operate. The Company has recommended that all employees work from home as much as their duties allow. In both the Baltics as well as in Sweden, the majority of employees worked from home at the end of December and the beginning of 2021. In-person meetings and business travel are avoided.
Community initiatives
In April and May, the Company ordered meals from three restaurants to be delivered to staff, caring for patients infected with covid-19, at one of Vilnius' hospitals. These deliveries were taken up anew at the end of January 2021, and are planned to continue until mid-March.
Market
2020 was a multi-faceted year for the Baltics. The coronavirus pandemic certainly had a considerable negative impact on the Baltic market, but compared to other countries, development was strong during the year. The Baltic countries have matured and the real estate markets are soon comparable to those in the Nordics.
Market development
The Baltics have shown resilience since the onset of the coronavirus pandemic. GDP declines have been smaller and the recovery faster than in the rest of Europe, which contrasts with how the Baltics were affected by the 2009 financial crisis. While the economy in the Euro area as a whole is expected to shrink by 6.8 per cent in 2020, compared to the previous year, GDP growth amounted to - 3.5 per cent in Latvia and -1.3 per cent in Lithuania. In Estonia the GDP is expected to -2.7 per cent. GDP decline in Lithuania was among the lowest in Europe.
Tourism is relatively speaking a smaller sector in the Baltics, but the spread of infection was also contained early on, and consumers therefore quickly returned. In Lithuania, a more advantageous export structure and broad stimulus packages contributed to the recession's mildness and the fast recovery. Financial uncertainty has lessened but is still considerable, especially as the rate of coronavirus transmission has increased across Europe during the winter, resulting in strict lockdowns in the Baltics.
Rental market
The coronavirus pandemic has had a considerable, but varied effect on the real estate market. Hotels, brick-andmortar retail and services have suffered a decline in demand, leading to loss of rental income as well as higher vacancies and sinking rent levels for landlords in these verticals. The rental market for logistics, however, has been robust, while
GDP, ANNUAL PERCENTAGE CHANGE INFLATION, ANNUAL PERCENTAGE CHANGE
Source: Eurostat, Swedbank Economic Outlook Source: Eurostat, Swedbank Economic Outlook
the housing market featured record activity and record prices. The office property market is somewhere in the
The transaction market reflects the development of the rental market. Investor interest has cooled while the yield requirements have increased for hotel and retail properties, at the same time as the interest, not least from institutional investors, in premium offices and logistics properties has increased, resulting in record-low yield requirements. At the turn of the year, estimated yield requirements were 5.5 per cent (5.8) in Vilnius, 6.0 per cent (6.2) in Riga and 6.1 per cent (6.1) in Tallinn. In total, the transaction volume for commercial properties in the Baltics was EUR 1,070m (1,072), which is in line with the volumes in the previous two
As office workers have been forced, or recommended, to work from home, the utilisation ratio of office properties has periodically been low. All the same, rents have generally been paid as agreed. Demand for premises has been muted, which in conjunction with continued activity in new development projects have led to higher vacancy rates in all Baltic capitals. At the end of the year, the vacancy rate was 5.4 per cent (3.0) in Vilnius, 19.2 per cent (12.0) in Riga, and 8.2 per cent (5.4) in Tallinn. Rent levels are stable, but are not
middle of this spectrum.
expected to rise in the short term.
Transaction market
years.
The period January-December 2020
Rental income increased during the year due to a larger property portfolio and higher rent levels. The property value increased through acquisitions of new properties and unrealised value changes. MFG has delivered strong sales during the autumn, and the value of the MFG holding has increased by EUR 12,423k during the year.
Rental income
The income, which is entirely composed of rental income, increased by 44 per cent during the year to EUR 19,186k (13,348), primarily due to a larger property portfolio and higher rent levels. The properties S7-3 and Vertas-2, which were acquired during the year, are taken up in the statements from the dates of taking possession, i.e. from the end of June and the end of September, respectively.
Rental income in a comparable portfolio rose by 5 per cent compared to 2019. In the fourth quarter, the increase was 4 per cent.
The average rent level in the property portfolio increased to EUR 14.9 per sq.m. per month at the end of the year, compared to EUR 14.7 at the end of 2019. During the year, new lease agreements have been signed at an average level of EUR 15.7 per sq.m. per month, and renegotiations at EUR 15.3 per sq.m. Net letting amounted to EUR -771k during the year and EUR 127k in the fourth quarter.
Property expenses
Property expenses rose by 20 per cent to EUR -1,689k (-1,402) due to a larger real estate portfolio.
Earnings
Net operating income was EUR 17,497k (11,946), and the surplus ratio amounted to 91 per cent (89). The high surplus ratio is attributable to the fact that a majority of the tenants, in addition to rent, also pay for e.g. electricity, heating, cooling, water and wastewater, as well as repairs, maintenance and property management. The increase in net operating income of 46 per cent is chiefly related to acquisitions. Central administration expenses amounted to
RENTAL INCOME AND PROFIT FROM PROPERTY MANAGEMENT, EURK
EUR -3,515k (-3,873) and profit from property management increased by 82 per cent to EUR 10,011k (5,489). The percentage increase in profit from property management is greater than that of rental income and net operating income as a result of economies of scale. Unrealised value changes in properties amounted to EUR 17,383k (10,208). Unrealised value changes in investments amounted to EUR 13,443k (17,742), of which EUR 12,423k (17,985) is attributable to MFG and EUR 1,019k (-243) to the fund investment. Unrealised value changes in derivatives amounted to EUR -782k (-1,006). Realised changes in value and dividends amounted to EUR 640k (5,403) during the year. Profit before tax amounted to EUR 40,695k (37,836) and the net profit/loss for the year to EUR 36,155k (35,266).
Segment Reporting
The Real Estate Direct segment generated a profit from property management of EUR 13,610k (9,413) and a profit after tax of EUR 25,671k (16,045).
The Real Estate Fund segment, comprising the holding in East Capital Baltic Property Fund II, generated a profit after tax of EUR 1,659k (2,287), of which an unrealised value change amounted to EUR 1,019k (-243) and a realised value change and received dividends amounted to EUR 640k (2,530).
The Other segment, comprising the holding in MFG, generated a profit after tax of EUR 12,423k (20,858), which this year was attributable in its entirety to an unrealised value change.
Unallocated central administration expenses and other financial income and expenses amounted to EUR 3,599k (-3,924).
UNREALISED CHANGES IN VALUE PROPERTIES, EURK
Reports in summary
The tables below provide a summary of the income statement and the balance sheet for January-December 2020 and 2019, respectively.
EARNINGS AND FINANCIAL POSITION
| 2020 | 2019 | |
|---|---|---|
| Summary, EURk | Jan-Dec | Jan-Dec |
| Rental income | 19,186 | 13,348 |
| Property expenses | -1,689 | -1,402 |
| Net operating income | 17,497 | 11,946 |
| Central administration | -3,515 | -3,873 |
| Financial income/ expenses | -3,971 | -2,584 |
| Profit from property management | 10,011 | 5,489 |
| Unrealised value changes | 30,044 | 26,944 |
| Realised value changes | 640 | 5,403 |
| Tax | -4,540 | -2,570 |
| Net profit/loss for the year | 36,155 | 35,266 |
| 2020 | 2019 | |
|---|---|---|
| Summary, EURk | 31 Dec | 31 Dec |
| ASSETS | ||
| Investment property | 372,400 | 290,256 |
| Long-term securities holdings | 102,152 | 88,709 |
| Cash and cash equivalents | 24,278 | 37,406 |
| Other assets | 3,395 | 3,951 |
| TOTAL ASSETS | 502,225 | 420,322 |
| EQUITY AND LIABILITIES | ||
| Equity | 309,942 | 268,192 |
| Interest-bearing liabilities to credit institutions | 173,151 | 137,771 |
| Derivatives | 2,745 | 1,963 |
| Deferred tax liabilities | 10,855 | 6,315 |
| Other liabilities | 5,532 | 6,081 |
| TOTAL EQUITY AND LIABILITIES | 502,225 | 420,322 |
Summary segment reporting
Below is a summary of segment reporting for January-December 2020 and 2019, respectively.
EARNINGS BY SEGMENT
| 2020 | 2019 | |
|---|---|---|
| EURk | Jan-Dec | Jan-Dec |
| Real Estate Direct | ||
| Profit from property management | 13,610 | 9,413 |
| Unrealised value changes, properties | 17,383 | 10,208 |
| Unrealised value changes, derivatives | -782 | -1,006 |
| Deferred tax | -4,540 | -2,570 |
| Profit, Real Estate Direct | 25,671 | 16,045 |
| Real Estate Fund | ||
| Unrealised value changes | 1,019 | -243 |
| Realised value changes and dividends | 640 | 2,530 |
| Profit, Real Estate Fund | 1,659 | 2,287 |
| Other | ||
| Unrealised value changes | 12,423 | 17,985 |
| Dividends | - | 2,873 |
| Profit, Other | 12,423 | 20,858 |
| Unallocated | ||
| Central administration expenses and other operating expenses | -3,515 | -3,873 |
| Unallocated net financial income/expense | -84 | -51 |
| Profit,Unallocated | -3,599 | -3,924 |
| Net profit/loss for the year | 36,155 | 35,266 |
Financing
Liabilities to credit institutions amounted at year-end to EUR 173,151k (137,771), corresponding to a loan-to-value ratio on properties of 46 per cent (47) and a loan-to-value ratio on all assets of 36 per cent (36). Unutilised credit facilities amounted to EUR 3,000k (23,700) and referred entirely to an unutilised overdraft facility. The average interest rate level at the end of the year amounted to 2.3 per cent (2.3) and the share of liabilities to credit institutions with fixed interest was 75 per cent (79), of which 100 per cent (100) were fixed using swaps.
At the end of the year, the average capital tie-up period on liabilities to credit institutions was 3.0 years (3.5). Average fixed interest term was 2.3 years (3.1). Annual repayments amounted at year-end to EUR 6,111k, corresponding to 3.5 per cent of liabilities to credit institutions. The derivatives are measured at fair value and the changes in value are recognised through profit or loss, with no effect on cash flow. At the end of the year, the fair value of derivatives was EUR -2,745k (-1,963). At the end of the term, the value is always zero.
Tax
The tax expenses for the year amounted to EUR -4,540k
(-2,570), all of which relates to deferred tax in Lithuania where a corporate income tax of 15 per cent is applied. The stated deferred tax liability is primarily attributable to the difference between the stated value of properties and their tax value, as well as tax losses carried forward. No corporate income tax is paid in Estonia or Latvia, where a 20 per cent corporate income tax is levied only on distributed profits.
Financial position and net asset value
Equity amounted to EUR 309,942k (268,192) and the equity/asset ratio to 62 per cent (64). Long-term net asset value per share was EUR 14.6 (13.1) corresponding to 147 SEK per share (137). Equity per share was EUR 14.0 (12.7) corresponding to 141 SEK per share (133).
Cash flow
Cash flow from operating activities before changes in working capital amounted to EUR 11,001k (9,968) for the year. Change in working capital was EUR -41k (-1,532). Cash flow from investing activities amounted to EUR -64,778k (-98,230) and from financing activities to EUR 40,750k (62,122). Total cash flow amounted to EUR -13,068k (-27,672) and cash and cash equivalents to EUR 24,278k (37,406) at year-end.
| Capital tie-up period | ||||
|---|---|---|---|---|
| Year | Available credit, EURm | Utilised, EURm | Unutilised, EURm | EURm |
| Variable | - | - | - | 43.8 |
| 2021 | 17.4 | 14.4 | 3.0 | - |
| 2022 | 12.0 | 12.0 | - | - |
| 2023 | 52.5 | 52.5 | - | 60.1 |
| 2024 | 67.6 | 67.6 | - | 58.4 |
| 2025 | 26.6 | 26.6 | - | 10.9 |
| Total | 176.2 | 173.2 | 3.0 | 173.2 |
LIABILITIES TO CREDIT INSTITUTIONS
FIXED INTEREST TERM AND CAPITAL TIE-UP PERIOD, YEAR AVERAGE INTEREST RATE LEVEL, %
Property portfolio
The property portfolio increased to around 121,000 sq.m. by year-end, after taking possession of the properties S7-3 and Vertas-2 in Vilnius, comprising around 21,700 sq.m. The property value increased by EUR 82.1m, chiefly through the acquisitions, but also due to unrealised value changes.
Property portfolio
Eastnine's property portfolio consists of ten modern office buildings in Riga and Vilnius. The total lettable area increased by around 21,700 sq.m. during the year, to around 121,000 sq.m., and the property value increased by 28 per cent to EUR 372.4m. The rental value amounted to EUR 22.8m (18.6) and the occupancy rate to 92.6 per cent (92.7) by year-end.
Eastnine presently has two development projects in Riga, The Pine and Kimmel, which are both in the planning stages. The Pine, an office building constructed entirely out of wood, obtained the first of two building permits during the third quarter. The final building permit is expected in 2021.
The Kimmel project, which includes a smaller group of grade listed buildings which must be preserved but may be modified, involves a potential new development of 34,000 sq.m., mainly offices. Permits for partial demolition work have been granted, and demolition is currently on-going.
Vilnius
Eastnine's property portfolio in central Vilnius consisted at year-end of seven properties with a total lettable area of around 101,000 sq.m., which is estimated to correspond to a market share of 12 per cent of the office market in the city. The combined property value in Vilnius as of 31 December 2020 was EUR 311.7m.
The S7-3 property, of around 14,500 sq.m., was taken into possession at the end of June and Vertas-2, of around 7,200 sq.m., at the end of September. The occupancy rate in Vilnius has increased through the acquisitions as well as reduced vacancy in the existing portfolio.
Riga
Eastnine's property portfolio in central Riga comprises three properties since the merger of the properties Alojas Biroji and Alojas Kvartals in the fourth quarter. Total lettable area amounted to around 20,000 sq.m., corresponding to a 3 per cent market share of the estimated office market. The vacancy rate has increased during the year, as a result of a few larger premises in the properties being vacated. The properties Kimmel and Alojas Biroji are expected to undergo significant development. The combined property value in Riga was EUR 60.7m on 31 December 2020.
PROPERTY PORTFOLIO
| Lettable area, sq.m. | ||||||||
|---|---|---|---|---|---|---|---|---|
| Retail and | Vacant area, | Occupancy | Property | Share of value, | ||||
| City | Offices | service | Other | Total area | sq.m. | rate, % | value, EURm | % |
| Vilnius | 97,631 | 3,240 | 266 | 101,137 | 2,355 | 97.7 | 311.7 | 84 |
| Riga | 16,987 | 2,471 | 435 | 19,893 | 6,591 | 66.9 | 60.7 | 16 |
| Total | 114,618 | 5,711 | 701 | 121,030 | 8,946 | 92.6 | 372.4 | 100 |
PROPERTY PORTFOLIO BY CITY, VALUE PROPERTY PORTFOLIO BY CATEGORY, VALUE
Tenants
Eastnine has around 160 lease agreements with around 120 tenants. The majority of Eastnine's rents are due on a monthly basis. Danske Bank is the largest tenant with 27 per cent of total annual rent. The ten largest tenants lease around 76,000 sq.m. at a total annual rent of EUR 13,437k. The average remaining lease term of the ten largest tenants amounted to 5.1 years (5.7), and of all tenants to 4.4 years (5.0). Around 71 per cent of Eastnine's tenants operate in the Finance and ICT industries.
Acquisitions and divestments
Eastnine completed the acquisition of S7-3 at the end of June and of Vertas-2 at the end of September. S7-3 comprises around 14,500 sq.m. and the purchase consideration amounted to around EUR 42.4m. Vertas-2 comprises around 7,200 sq.m. and the purchase consideration amounted to EUR 20.0m.
Value changes in properties
The fair value of the property portfolio increased during the year, chiefly due to acquisitions. The value at the end of the year was EUR 372,400k (290,256). Unrealised value changes amounted to EUR 17,383k (10,208), corresponding to 6.0 per cent (6.4) of opening property values. The positive unrealised value changes during the year were primarily affected by lower yield requirements. At the same time, lower market rents in Riga, lower inflation forecasts and reservations for rent losses, due to the coronavirus pandemic, have affected in the opposite direction.
CHANGE IN PROPERTY VALUE, EURK
| 2020 | 2019 | |
|---|---|---|
| Jan-Dec | Jan-Dec | |
| Property value at the beginning of the year | 290,256 | 158,862 |
| Property acquisitions | 62,461 | 119,221 |
| Investments in existing properties | 2,300 | 1,965 |
| Unrealised value changes | 17,383 | 10,208 |
| Property value at the end of the year | 372,400 | 290,256 |
LARGEST TENANTS
| Tenant | Annual rent, EURk |
Share of annual rent under contract, % |
Sq.m. | Number of agreements |
Lease agreement term1 , years |
Break option in lease agreements2 , years |
|---|---|---|---|---|---|---|
| Danske Bank | 5,434 | 27 | 30,935 | 3 | 2.7 | 2.7 |
| Telia | 2,856 | 14 | 15,960 | 1 | 8.2 | 8.2 |
| Swedbank | 1,821 | 9 | 11,266 | 4 | 10.7 | 4.8 |
| Visma | 961 | 5 | 5,605 | 3 | 3.0 | 3.0 |
| Citco | 647 | 3 | 3,009 | 7 | 6.6 | 1.6 |
| Webhelp | 538 | 3 | 2,726 | 5 | 1.6 | 1.6 |
| Cobalt | 330 | 2 | 1,816 | 4 | 4.0 | 4.0 |
| Europos Socialinio fondo agentura | 286 | 2 | 1,769 | 3 | 2.3 | 1.0 |
| Transact Pro | 283 | 1 | 1,430 | 1 | 7.5 | 1.5 |
| Invalda INVL | 281 | 1 | 1,532 | 3 | 4.7 | 4.7 |
| Total | 13,437 | 67 | 76,048 | 34 | 5.1 | 3.3 |
1Weighted average of remaining lease term.
2Weighted average remaining lease term calculated up to "break option" date.
OCCUPANCY RATE AND SURPLUS RATIO, % PROPERTY VALUE AND LOAN-TO-VALUE RATIO
Valuation model
Eastnine changed its valuation model from 2020 onwards. The new valuation model is based on the present value of future cash flows (net operating income less remaining investments) calculated for a five or ten-year calculation period. Cash flow determinations with a longer calculation period than five years are normally applied to properties with only one or a handful of tenants with long lease terms, where the cash flow is more predictable.
Eastnine normally values its properties quarterly, with an external valuation taking place at least once over a rolling 12 month period. External and internal valuations use the same valuation methodology. During the fourth quarter, four properties have been externally valued, and six properties internally. Colliers was contracted to carry out the valuations this year.
Inflation, discount rate, yield requirements, market rent as well as vacancy estimates are important parameters in the valuation model. The inflation is based on the market's assessment, in the short as well as the long term. The discount rate and yield requirement are based on the market return requirement for similar investment objects, with the addition of risks related to real estate, e.g. geographical location, the condition of the property, and future vacancy risk. The market rent is based on the actual current rent level for similar objects. Vacancies are individually calculated on the lease level, as well as with a long-term, normalised vacancy rate.
Valuation of properties
Property valuations are based on assessments and assumptions, made at the time of the valuation, of both observable and non-observable input data. Observable data which have a considerable impact on the value are current rent levels, actual and budgeted property expenses, determined and known future investments and actual inflation. Non-observable data are yield requirements as well as expected future market rents and vacancies.
Cash flow from rent payments are estimated based on current lease agreements and known and agreed-upon future changes. Rents follow indexing clauses in existing
RENTAL VALUE AND OCCUPANCY RATE
agreements. At the end of lease terms, potential lease extensions and the then-applicable market rent are assessed. Operating and maintenance costs are based on historical outcomes and budgeted costs. Reservations for maintenance costs and property investments are normally calculated according to budget for year 1, and thereafter as a percentage of the estimated rental income or as a cost per square meter.
Valuation assumptions
Eastnine's property portfolio primarily comprises centrally located office properties in Riga and Vilnius. As of 31 December, the average rent amounted to EUR 14.9 per sq.m. The estimated market rent in these valuations amounted to an average of EUR 15.0 per sq.m. The majority of the lease agreements are so-called triple-net leases, which is why property costs chiefly have an effect during vacancies.
Tenant-specific customisations and investments made for new letting is calculated as EUR 180 per sq.m. in Latvia and EUR 190 per sq.m. in Lithuania. Other property investments have been calculated in the interval from 2.0 to 3.0 per cent of rental income, and averaged 2.2 per cent. The long-term vacancy rate is generally set at 4.5 per cent in the valuation models.
Very low inflation is expected for the nearest year, increasing in future periods. The long-term inflation is estimated to be 1.5 per cent. The weighted yield requirement in the valuation model amounted to 5.8 per cent and the average discount rate to 7.2 per cent.
VALUATION MODEL
| 2020 | |
|---|---|
| Valuation assumptions | 31 Dec |
| Weighted yield requirement, % | 5.8 |
| Average property investments, % | 2.2 |
| Average rent, EUR/sq.m./month | 15.0 |
| Average discount rate, % | 7.2 |
| Investment for new letting, EUR/sq.m. | 180/190 |
| Long-term inflation, % | 1.5 |
| Long-term vacancy rate, % | 4.5 |
| Rental value, | ||||||
|---|---|---|---|---|---|---|
| Type of premise | Sq.m. | Rental value, EURm | EUR/sq.m. | Occupancy rate, % | ||
| Offices | 114,618 | 20.6 | 14.9 | 97.8 | ||
| Retail and service | 5,711 | 1.0 | 14.5 | 77.5 | ||
| Parking | - | 1.0 | - | - | ||
| Other1 | 701 | 0.2 | 7.3 | 41.6 | ||
| Total | 121,030 | 22.8 | 14.9 | 92.6 |
1 Includes rental value for other premises and other rental value, e.g. advertising boards and aerials. Rental value EUR/sq.m. is calculated using rental value attributable to other premises.
Current earning capacity
In order to facilitate the assessment of the company's current position, Eastnine reports on current earning capacity. Earning capacity is a theoretical assessment describing the company's current earnings on 31 December 2020.
Earning capacity provides a snapshot
Earning capacity is not to be regarded as a forecast for the coming twelve months, but as a snapshot of the potential earnings the company can generate under given circumstances. It is based on the property portfolio held on the reporting day.
Earning capacity does not take into account an assessment of the development of rent levels, vacancies, property expenses, interest rates, value changes or other factors that may affect earnings.
Eastnine's calculated earning capacity is based on the following assumptions about income and costs:
- Rental income comprises contracted income including rent supplements, with deductions for any rental discounts, on the reporting day.
-
Property costs are based on an assessment of a normal year's operating expenses, maintenance costs, property taxes, site leasehold fees as well as property management expenses.
-
Central administration expenses have been calculated based on the existing organisation and the current property portfolio on the reporting day.
- Financial income and expenses have been calculated based on the Company's debt liability and average interest level on the reporting day.
Comment to earning capacity
The level of rental value in the portfolio has increased somewhat since 30 September, while rental income in earning capacity is 2 per cent lower compared to 30 September. The reduction is due to increased vacancies, resulting in higher property expenses as well as lower net operating income and profit from property management. Interest costs are somewhat lower compared to the previous quarter, as a result of amortisations having decreased liabilities to credit institutions.
The percentage decrease of the prospective yield is primarily an effect of the higher market value of the properties as well as costs due to vacancies.
| 2020 | 2020 | ||
|---|---|---|---|
| Current earning capacity, EURk | 31 Dec | 30 Sep | Change, % |
| Rental value | 22,791 | 22,730 | 0 |
| Less vacancy value | -1,799 | -1,371 | +31 |
| Sum rental income | 20,992 | 21,359 | -2 |
| Property expenses | -2,200 | -2,150 | +2 |
| Net operating income | 18,792 | 19,209 | -2 |
| Central administration expenses | -3,600 | -3,600 | 0 |
| Interest expenses | -4,018 | -4,044 | -1 |
| Profit from property management | 11,174 | 11,565 | -3 |
| 2020 | 2020 | Change, | |
|---|---|---|---|
| Key figures, current earning capacity | 31 Dec | 30 Sep | unit |
| Surplus ratio, % | 90 | 90 | 0 |
| Interest coverage ratio, multiples | 3.8 | 3.9 | -0.1 |
| Average interest rate, % | 2.3 | 2.3 | 0.0 |
| Prospective yield1 , % |
5.2 | 5.5 | -0.3 |
| Investment properties, EURk | 372,400 | 356,940 | +15,460 |
1 Net operating income in earning capacity, in relation to the value of investment properties, excluding development properties.
East Capital Baltic Property Fund II
The value of Eastnine's holding in East Capital Baltic Property Fund II (the segment Real Estate Fund) increased by EUR 1,019k during the year, corresponding to a total return of 7.6 per cent. A dividend of EUR 640k has been received during the year.
East Capital Baltic Property Fund II
Operations
East Capital Baltic Property Fund II has a total of four properties in logistics, retail and offices. All properties are located in Tallinn.
East Capital announced at the turn of the month January/ February 2021 that the fund will be extended, for a third and final time, by one year. The fund will now mature on 2 May 2022.
| 2020 | 2019 | |
|---|---|---|
| Key figures | Jan-Dec | Jan-Dec1 |
| Unrealised value change, EURk | 1,019 | -243 |
| Received dividends, EURk | 640 | 1,280 |
| Total return, % | 7.6 | 4.7 |
| 2020 | 2019 |
|---|---|
| 31 Dec | 31 Dec |
| 43 | 44 |
| 22,831 | 21,812 |
| 4.5 | 5.2 |
1 During the 2019 financial year, Eastnine divested shares in East Capital Baltic Property Fund III, which is excluded in the summary above.
Value of and dividend from Eastnine's holding
Eastnine does not carry out its own valuation of the fund holding. Instead, the Company's reported value consists of a share of the fund's total value. The value amounted to EUR 22,831k (21,812) at year-end. The unrealised value change of EUR 1,019k, corresponding to 4.7 per cent, is entirely a result of net operating income during the year.
A dividend of EUR 640k (1,280) has been received during the year. Eastnine's total return was 7.6 per cent (4.7).
REAL ESTATE FUND, % OF ASSETS
Melon Fashion Group
Melon Fashion Group (MFG) has weathered the effects of the coronavirus pandemic very well, reporting higher sales as well as increased profits in 2020. The value of Eastnine's holdings in MFG (the segment Other) increased by EUR 12,423k to EUR 79,320k at yearend. This increase in value is primarily due to expectations of continued strong sales as well as a lower risk level.
Melon Fashion Group
Operations
Melon Fashion Group demonstrated a strong sales development in 2020, in spite of a troublesome spring with the eruption of the coronavirus pandemic. Today, all stores are open after periods of complete closure during the spring and early summer. Total sales have increased by 10 per cent up to and including December 2020. Three of four brands have increased sales per sq.m. of store area; the fourth was negatively affected by supply chain issues, that are expected to be resolved in the first quarter of 2021. E-commerce sales grew with 78 per cent during the year and the share of total sales amounted to 34 per cent (21). MFG has very good liquidity.
At year-end, the store network consisted of a total of 809 stores (822), of which 240 were franchises (265). The total store area amounted to 208,000 sq.m., of which 39,000 sq.m. in franchise stores.
Income and earnings
MFG's earnings for the full year 2020 have not been published at the time of publication of Eastnine's year-end report. According to preliminary reporting, MFG's total sales in 2020 amounted to RUB 25,219m (22,990). MFG's EBITDA, excluding effects of IFRS 16, amounted to RUB 2,930m (2,834) and the EBITDA margin to 11.6 per cent (12.3).
Value of and dividends from Eastnine's holding
Eastnine's valuation is based on preliminary reporting as well as an analysis of future development. Fair value of Eastnine's holding in MFG increased by EUR 12,423k (17,985) during the year to EUR 79,320k (66,897). The positive value change is composed of several parts. Two of the most important of these are an expectation of higher future growth based on the 2020 outcomes, and a lower risk level (WACC). The value change is unrealised. The ruble has weakened by 30 per cent during the year, which has negatively affected the value of Eastnine's holding.
Eastnine has not received any dividend in 2020 (EUR 2,873). The total return of the holding was 18.6 per cent (42.6).
OTHER, % OF ASSETS
Melon Fashion Group
| 2020 | 2019 |
|---|---|
| Jan-Dec | Jan-Dec |
| 12,423 | 17,985 |
| - | 2,873 |
| 18.6 | 42.6 |
| 2019 | |
| 31 Dec | |
| 36 | 31 Dec 36 |
| 79,320 | 66,897 |
| 2020 |
Other information and accounting principles
General information
Eastnine AB (publ), corporate ID no. 556693-7404, is a Swedish limited company, listed on Nasdaq Stockholm, with its registered office in Stockholm. The Group's real estate operations are managed through the Estonian subsidiary Eastnine Baltics OÜ, with subsidiaries in Latvia and Lithuania, which together comprise the Eastnine Group. At the end of the year, the Eastnine Group employed 22 fulltime employees, of which nine were employed at the head office in Stockholm, nine in Vilnius and four in Riga.
The Company and the Group's interim report concerns the period January - December 2020. All figures are presented in EUR thousands unless otherwise stated. Rounding differences may occur.
Risks and uncertainties
The dominant risks in Eastnine's operations are commercial risks in the form of changes in rent levels, vacancies and interest rates, as well as changes in the economic or business climate, and exchange rates in the markets where Eastnine is present. A more detailed description of Eastnine's material risks and uncertainties is provided in the Company's Annual Report 2019 on pages 28‒29. Risks associated with the coronavirus pandemic are presented on p. 4 in this interim report and a market analysis for the coming months is provided in the Market section on p. 5.
Parent Company
Net profit/loss for the year amounted to EUR 12,355k (19,037). The profit is primarily attributable to an unrealised value change in Melon Fashion Group, of EUR 12,423k (17,985), as well as operating expenses and financial income. For the Parent Company's income statement and balance sheet, see p. 26.
Dividend
The Board of Directors proposes a dividend of 3.00 SEK per share (2.70), with payments evenly distributed on four occasions in May, August and November 2021, and February 2022. The dividend would correspond to an increase of 11 per cent and amount to 66 per cent of the 2020 profit from property management after current tax.
Sustainability
Eastnine undertakes active sustainability efforts. This year, the properties Alojas Biroji and Vertas-1 in Vilnius obtained LEED Platinum certification. The property S7-3 in Vilnius, which was taken into possession during the year, has previously obtained BREEAM Excellent certification. At the end of the year, 87 per cent of the property area (excluding properties expected to undergo significant redevelopment) was certified for sustainability, attaining either LEED Platinum or BREEAM Excellent.
Eastnine is planning a new development of an office building built entirely out of wood: The Pine, in Riga. This building is planned to receive double sustainability certificates: LEED Platinum and WELL.
Eastnine began the implementation of green leases in the latter part of 2020. At year-end, all leases in six out of seven properties in Vilnius are green leases, meaning that all leases in six out of a total of ten properties are classified as green leases. Efforts to implement a web-based system for supplier audits were begun in 2020. In total, 28 suppliers will be audited in the first round, of which nearly a third had been audited by year-end.
The Company tied third place in the Allbright Foundation's Autumn 2020 ranking of gender equality among listed companies in Sweden. In the employee survey carried out in 2020, 100 per cent of employees considered Eastnine to be a "Great Place to Work".
During the autumn, a green financing framework was launched, which was given the highest possible rating - Dark Green and Excellent - by the independent evaluation institute Cicero.
Eastnine's sustainability efforts was rated five stars and placed in the top 20th percentile in GRESB's global annual ranking of sustainability efforts among real estate companies. The sustainability report, which was produced according to the Global Reporting Initiative's guidelines and published as part of the 2019 annual report, contains information about the company's primary concerns, sustainability goals and indicators.
Related parties
Eastnine AB has a related party relationship with its subsidiaries, see Note 28 in the 2019 Annual Report, as well as with Board members and employees.
Eastnine AB's management, Board members and their close relatives and related companies control 29 per cent (30) of voting rights in the Company.
Summary of material accounting principles
Eastnine AB (publ) prepares its consolidated accounts according to the International Financial Reporting Standards (IFRS), approved by the European Union as well as interpretations of these (IFRIC). The interim report has been prepared in accordance with the International Accounting Standards (IAS) 34 Interim Financial Reporting and the Swedish Annual Accounts Act (Årsredovisningslagen).
The Group applies the same accounting principles and valuation methods as in the latest annual report, with the exception mentioned below regarding IFRS 3. Other new or revised IFRS standards or other IFRIC interpretations applying from 1 January 2020 have not had a material effect on the Group's financial statements.
The Parent Company prepares its accounts in accordance with RFR 2, Reporting of a legal entity, as well as the Swedish Annual Accounts Act (Årsredovisningslagen) and apply the same accounting principles and valuation methods as at the last annual report.
Changes in accounting principles
IFRS 3 Business Combination has entered into force as of 1 January 2020. The changed definition results in a simplified assessment of whether an acquisition is to be considered as an asset acquisition or not. If the fair value in all material respects is concentrated in an identifiable asset or group of assets, the acquisition can be regarded as an asset acquisition. If not, the acquisition is to be tested against the criteria for business combinations. All of the Group's property acquisitions have been classified as asset acquisitions, and the Company regards the change of standard as a simplification and reinforcement of future assessments. The change in accounting principles has not had any impact on the profit-and-loss statements, balance sheets or key figures.
Estimates and assumptions in the financial statements In preparing these financial statements according to the IFRS, the executive management makes judgements, estimates and assumptions that affect the application of the Company's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may
deviate from these estimates and assessments. Estimates and underlying assumptions are regularly reviewed. Revisions to estimates are reported in the period that the change takes place and in the future periods that are affected.
Key sources of uncertainty
The sources of uncertainty in the estimates below refer to such sources that result in a significant risk that the value of assets and liabilities may have to be substantially adjusted during the financial year. For valuation of investment properties, assessments and assumptions can have a significant effect on the Group's income and financial position. These valuations require e.g. estimates and assumptions of future cash flows as well as a determination of the discounting rate and yield requirements. To reflect the uncertainty inherent in the assumptions and assessments made, a sensitivity analysis is provided for material property parameters.
In regards to other investments that are not traded on an active market and where fair value is determined not by actual bid quotes but by means of valuation models, there is a risk that the estimated fair value of holdings will be different in future periods. The Company applies its models consistently from period to period, but the determination of fair value is inherently uncertain. Given the control procedures applied, the group considers the fair values reported in the balance sheet to have been carefully calculated and considered in order to reflect the underlying financial values.
Important considerations in the application of the Group's accounting policies
The holdings in MFG, into which Eastnine invested during its period as an investment entity, constitutes an associated company as Eastnine has considerable influence over MFG. This holding is recognised at fair value through profit/loss, using the exemption from the equity method in IAS 28. Eastnine has made the assessment that this exemption is applicable to the Company. The assessment is the same as that made in the Annual Accounts for 2019.
Eastnine has ownership shares in East Capital (Lux) SCA, SICAV-SIF (umbrella fund), amounting to around 12 per cent. For Eastnine, this holding results in a 43 per cent share of the returns from the sub-fund East Capital Baltic Property Fund II. This share has been assessed not to constitute an associated company, as Eastnine can not and has not been able to exert significant influence over the fund. Considering that the Company is not able to exert any influence over the fund, the holding is reported in accordance with IFRS 9 Financial Instruments.
Segment Reporting
Business segments are reported in the way which corresponds to the internal classification which is submitted to the Company's senior management and Board of Directors. Eastnine classifies and evaluates its various segments based on the nature of the investments. The following segments are used in the internal reporting: Real Estate Direct, Real Estate Fund and Other.
Events after year-end
No significant events have occurred after the end of the year.
Assurance from the CEO
The CEO certifies that the Year-end report presents a true and fair view of the Parent Company's and the Group's operations, financial position and profits and describes the significant risks and uncertainties facing the Company and the Group.
Stockholm, 17 February 2021
Kestutis Sasnauskas CEO
Review Report
To the Board of Eastnine AB (publ)
Corporate ID no. 556693-7404
Introduction
We have reviewed the condensed interim financial information (interim report) of Eastnine AB (publ) as of 31 December 2020 and the twelve-month period then ended. The Board of Directors and the Managing Director are responsible for the preparation and presentation of this interim report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.
Scope of the Review
We conducted our review in accordance with International Standard on Review Engagements ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matter, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing practices. The procedures performed in a review do not enable us to obtain a level of assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. The conclusion based on a review does not therefore have the level of assurance of an explicit opinion based on an audit.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim report is no prepared, in all material respects, for the Group in accordance with IAS 34 and the Annual Accounts Act, and for the Parent Company in accordance with the Annual Accounts Act.
Stockholm, 17 February 2021
KPMG AB
Peter Dahllöf Authorised public accountant
The Share
Eastnine's share price decreased by 9 per cent during the year and was SEK 125.0 (137.4) at year-end. Long-term NAV per share rose by 7 per cent to SEK 147 (137) at year-end, chiefly due to a strong profit from property management as well as positive unrealised value changes to properties and the holding in MFG.
Share price development and volume
Uncertainty concerning the effect of the coronavirus pandemic on the global economy initially had a considerable impact on stock markets around the world. Eastnine's share was no exception to this. After a positive start to the year, reaching a high of SEK 150.2 on 21 February, the price dove in March to a low of SEK 95.0 on 23 March. From that point onward, the trend has been positive, and at year-end the price was SEK 125.0, which was tangent level to the highest level after the outbreak of the virus in March. In total, Eastnine's share price sank by 9 per cent during the year, while the OMX Stockholm Real Estate Index sank by 6 per cent.
Eastnine's market capitalisation amounted at year-end to SEK 2.8 billion (2.9). The average daily volume on Nasdaq amounted to 18,743 shares (15,743) during the year. Daily volume was highest on the 19 November, in conjunction with the sale of repurchased shares. The volume on that day
TURNOVER 2020 KEY FIGURES
amounted to 1,317,625 shares. The free float was 62.8 per cent (62.9).
Net asset value
The long-term NAV per share rose by SEK 10, corresponding to 7 per cent, amounting at year-end to SEK 147 (137). Equity per share rose by SEK 8, corresponding to 6 per cent, to SEK 141 (133).
Positive unrealised value changes to properties and to the MFG holding, as well as a strong profit from property management, were the primary factors contributing to the rise in NAV per share. A slight weakening of EUR towards SEK has had an opposite impact.
SHARE PRICE 2020 SHARE PRICE AND NET ASSET VALUE
| 2020 | 2019 | |
|---|---|---|
| Data per share | 31 Dec | 31 Dec |
| Equity, EUR | 14.0 | 12.7 |
| Long-term net asset value, EUR | 14.6 | 13.1 |
| Share price, EUR | 12.4 | 13.1 |
| Equity, SEK | 141 | 133 |
| Long-term net asset value, SEK | 147 | 137 |
| Share price, SEK | 125.0 | 137.4 |
Number of shares
Eastnine's share is listed on Nasdaq Stockholm Mid Cap, Real Estate. The total number of shares in Eastnine AB amounted to 22,370,261 on 31 December 2020. Adjusted for repurchased shares held in treasury, the number of listed shares amounted to 22,149,061.
The number of known shareholders was 4,990 (5,634). Two owners held at least ten per cent of the total number of shares in the Company (Keel Capital's holdings, in the table, has been rounded upwards to 10.0 per cent). The proportion of shares that are Swedish-owned amounted to 73.9 per cent (71.3).
Buy-back
During the fourth quarter, 1,000,000 previously repurchased shares were sold at a price of SEK 115. The resulting cash is to be used for property investments. On
LARGEST SHAREHOLDERS AS AT 31 DECEMBER 2020
31 December 2020, the Company held 221,200 own shares in treasury, corresponding to around 1.0 per cent of total outstanding shares.
At the AGM 2020, the Board received a new mandate to decide on share buy-back, providing that the company's holding of treasury shares not exceed at any time 10 per cent of all shares in the Company.
Dividend
The Board of Director proposes a dividend of 3.00 SEK per share (2.70) for the 2020 financial year, with payments evenly distributed over four occasions in May, August and November 2021, and February 2022. The proposed dividend would correspond to an increase of 11 per cent and 66 per cent of the 2020 profit from property management after current tax.
The dividend would be distributed on four occasions per year, instead of two as previously, in order to improve the liquidity of the stock and even out the Company's cash flow.
| Shareholders | Number of shares | % |
|---|---|---|
| Peter Elam Håkansson1 | 6,074,754 | 27.2 |
| Arbona AB (publ) | 2,240,328 | 10.0 |
| Keel Capital | 2,231,496 | 10.0 |
| Lazard Asset Management | 1,480,434 | 6.6 |
| Norges Bank | 767,071 | 3.4 |
| ICA-handlarnas Förbund | 700,000 | 3.1 |
| Länsförsäkringar Fonder | 600,000 | 2.7 |
| Kestutis Sasnauskas | 461,818 | 2.1 |
| Nordnet Pensionsförsäkring | 457,374 | 2.0 |
| Avanza Pension | 447,976 | 2.0 |
| Dimensional Fund Advisors | 335,405 | 1.5 |
| Prioritet Finans | 300,000 | 1.3 |
| Karine Hirn | 258,917 | 1.2 |
| Jacob Grapengiesser | 167,861 | 0.8 |
| SEB Fonder | 144,169 | 0.6 |
| 15 largest | 16,667,603 | 74.5 |
| Eastnine AB (repurchased shares) | 221,200 | 1.0 |
| Others | 5,481,458 | 24.5 |
| Total | 22,370,261 | 100.0 |
1Private and via companies (East Capital Holding AB och Rytu Invest AB). Source: Monitor
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| 2020 | 2019 | 2020 | 2019 | |
|---|---|---|---|---|
| EUR thousands | Jan-Dec | Jan-Dec | Oct-Dec | Oct-Dec |
| Rental income | 19,186 | 13,348 | 5,251 | 4,161 |
| Property expenses | -1,689 | -1,402 | -267 | -410 |
| Net operating income | 17,497 | 11,946 | 4,983 | 3,751 |
| Central administration expenses | -3,515 | -3,873 | -834 | -1,184 |
| Interest expenses | -3,703 | -2,225 | -1,029 | -790 |
| Other financial income and expenses | -268 | -359 | -59 | -78 |
| Profit from property management | 10,011 | 5,489 | 3,061 | 1,699 |
| Unrealised changes in value of properties | 17,383 | 10,208 | 14,997 | 3,914 |
| Unrealised changes in value of derivatives | -782 | -1,006 | -109 | 702 |
| Unrealised changes in value of investments | 13,443 | 17,742 | 21,981 | 11,918 |
| Realised value changes and dividends from investments | 640 | 5,403 | 640 | 2,588 |
| Profit/loss before tax | 40,695 | 37,836 | 40,570 | 20,821 |
| Current tax | - | - | - | - |
| Deferred tax | -4,540 | -2,570 | -3,066 | -1,246 |
| Net profit/loss for the year/period1 | 36,155 | 35,266 | 37,504 | 19,575 |
| Number of shares issued, adjusted for repurchased shares, thousand | 22,149 | 21,149 | 22,149 | 21,149 |
| Weighted average number of shares before dilution, thousand | 21,269 | 21,187 | 21,627 | 21,149 |
| Weighted average number of shares after dilution, thousand | 21,319 | 21,231 | 21,677 | 21,195 |
| Earnings per share before dilution, EUR | 1.70 | 1.66 | 1.73 | 0.93 |
| Earnings per share after dilution, EUR | 1.70 | 1.66 | 1.73 | 0.92 |
1Total comprehensive income for the period/year corresponds to net profit/loss for the period/year.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| 2020 | 2019 | |
|---|---|---|
| EUR thousands | 31 Dec | 31 Dec |
| ASSETS | ||
| Non-current assets | ||
| Intangible assets | 2 | 2 |
| Investment properties | 372,400 | 290,256 |
| Right-of-use assets, leaseholds | 1,197 | 1,204 |
| Equipment | 174 | 216 |
| Long-term securities holdings | 102,152 | 88,709 |
| Other non-current receivables | 465 | 175 |
| Total non-current assets | 476,389 | 380,562 |
| Current assets | ||
| Other current assets | 1,557 | 2,355 |
| Cash and cash equivalents | 24,278 | 37,406 |
| Total current assets | 25,836 | 39,761 |
| TOTAL ASSETS | 502,225 | 420,322 |
| EQUITY AND LIABILITIES | ||
| Equity | ||
| Share capital | 3,660 | 3,660 |
| Other contributed capital | 257,850 | 252,252 |
| Retained earnings including net profit/loss for the year | 48,432 | 12,280 |
| Total equity | 309,942 | 268,192 |
| Non-current liabilities | ||
| Liabilities to credit institutions | 153,208 | 132,571 |
| Derivatives | 2,745 | 1,963 |
| Deferred tax liabilities | 10,855 | 6,315 |
| Lease liability | 1,175 | 1,175 |
| Other non-current liabilites | 1,790 | 1,745 |
| Total non-current liabilities | 169,772 | 143,769 |
| Current liabilities | ||
| Liabilities to credit institutions | 19,943 | 5,200 |
| Other liabilities | 1,703 | 2,211 |
| Accrued expenses and deferred income | 865 | 951 |
| Total current liabilities | 22,510 | 8,361 |
| TOTAL EQUITY AND LIABILITIES | 502,225 | 420,322 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| Other | ||||
|---|---|---|---|---|
| EUR thousands | Share capital |
contributed capital |
Retained earnings |
Total equity |
| Opening equity 1 January 2019 | 3,660 | 260,145 | -22,985 | 240,819 |
| Net profit/loss for 1 January-31 December | - | - | 35,266 | 35,266 |
| Dividend to shareholders | - | -4,519 | - | -4,519 |
| Share buy-back | - | -3,525 | - | -3,525 |
| Long-term incentive program (LTIP 2018) | - | 151 | - | 151 |
| Closing equity 31 December 2019 | 3,660 | 252,252 | 12,280 | 268,192 |
| Net profit/loss for 1 January-31 December | - | - | 36,155 | 36,155 |
| Dividend to shareholders | - | -5,403 | - | -5,403 |
| Sale of treasury shares | - | 10,872 | - | 10,872 |
| Long-term incentive program (LTIP 2018) | - | 126 | - | 126 |
| Closing equity 31 December 2020 | 3,660 | 257,847 | 48,435 | 309,942 |
CONSOLIDATED STATEMENT OF CASH FLOW
| 2020 | 2019 | 2020 | 2019 | |
|---|---|---|---|---|
| EUR thousands | Jan-Dec | Jan-Dec | Oct-Dec | Oct-Dec |
| Operating activities | ||||
| Profit/loss before tax | 40,695 | 37,836 | 40,570 | 20,821 |
| Adjustments not included in cash flow from operating activities | -29,694 | -27,868 | -36,716 | -16,438 |
| Income tax paid | - | - | - | - |
| Cash flow from operating activities before changes in working capital | 11,001 | 9,968 | 3,854 | 4,383 |
| Cash flow from changes in working capital | ||||
| Increase (-)/decrease(+) in other current receivables | 508 | -1,742 | 5,110 | -1,143 |
| Increase (+)/decrease(-) in other current payables | -549 | 210 | -4,591 | 1,406 |
| Cash flow from operating activities | 10,960 | 8,436 | 4,373 | 4,646 |
| Investing activities | ||||
| Investments in existing properties | -2,300 | -1,965 | -463 | -667 |
| Acquisition of properties | -62,461 | -119,221 | - | -82,399 |
| Purchase of equipment | -17 | -152 | -6 | -105 |
| Investments in other financial assets | - | -1,982 | - | - |
| Divestment of other financial assets | - | 25,090 | - | 25,090 |
| Cash flow from investing activities | -64,778 | -98,230 | -469 | -58,081 |
| Financing activities | ||||
| New loans | 40,950 | 74,029 | - | 53,829 |
| Repayment of loans | -5,570 | -3,808 | -1,528 | -1,245 |
| Payment of lease liabilities | -99 | -55 | -26 | -55 |
| Dividend to shareholders | -5,403 | -4,519 | -2,701 | -2,259 |
| Sale of treasury shares | 10,872 | - | 10,872 | - |
| Own share buy-back | - | -3,525 | - | - |
| Cash flow from financing activities | 40,750 | 62,122 | 6,617 | 50,270 |
| Cash flow for the period | -13,068 | -27,672 | 10,520 | -3,165 |
| Cash and cash equivalent at the beginning of the period | 37,406 | 65,119 | 13,804 | 40,596 |
| Exchange rate differences in cash and cash equivalents | -60 | -41 | -46 | -25 |
| Cash and cash equivalent at the end of the period | 24,278 | 37,406 | 24,278 | 37,406 |
KEY FIGURES
| 2020 | 2019 | 2020 | 2019 | |
|---|---|---|---|---|
| Jan-Dec | Jan-Dec | Oct-Dec | Oct-Dec | |
| Surplus ratio, % | 91 | 89 | 95 | 90 |
| Loan-to-value ratio, % | 36 | 36 | 36 | 36 |
| Loan-to-value ratio, properties (LTV), % | 46 | 47 | 46 | 47 |
| Debt ratio, multiple | 12.4 | 17.1 | 12.4 | 17.1 |
| Interest coverage ratio, multiple | 3.7 | 3.5 | 4.0 | 3.2 |
| Return on equity Real Estate Direct, % | 15.8 | 14.3 | 35.9 | 20.3 |
| Return on equity, % | 12.5 | 13.9 | 52.5 | 30.3 |
| Earnings per share before dilution, EUR | 1.70 | 1.66 | 1.73 | 0.93 |
| Profit from property management per share, EUR | 0.47 | 0.26 | 0.14 | 0.08 |
| Cashflow per share from operating activities, EUR | 0.52 | 0.40 | 0.20 | 0.22 |
| Cashflow per share, EUR | -0.61 | -1.31 | 0.49 | -0.15 |
SEGMENT REPORTING
Eastnine classifies and evaluates the various segments based on the nature of the investments. Segments are presented from the point of view of management and are divided into the following segments: Real Estate Direct, Real Estate Fund and Other.
| EUR thousands | Real Estate | Real Estate | |||
|---|---|---|---|---|---|
| 1 Jan-31 Dec 2020 | Direct | Fund | Other | Unallocated | Total |
| Rental income | 19,186 | - | - | - | 19,186 |
| Property expenses | -1,689 | - | - | - | -1,689 |
| Net operating income | 17,497 | - | - | - | 17,497 |
| Central administration expenses | - | - | - | -3,515 | -3,515 |
| Interest expenses | -3,703 | - | - | - | -3,703 |
| Other financial income and expenses | -184 | - | - | -84 | -268 |
| Profit from property management | 13,610 | - | - | -3,599 | 10,011 |
| Unrealised changes in value of properties | 17,383 | - | - | - | 17,383 |
| Unrealised changes in value of derivatives | -782 | - | - | - | -782 |
| Unrealised changes in value of investments | - | 1,019 | 12,423 | - | 13,443 |
| Realised value changes and dividends from investments | - | 640 | - | - | 640 |
| Profit/loss before tax | 30,211 | 1,659 | 12,423 | -3,599 | 40,695 |
| Deferred tax | -4,540 | - | - | - | -4,540 |
| Net profit/loss for the year | 25,671 | 1,659 | 12,423 | -3,599 | 36,155 |
| Investment properties | 372,400 | - | - | - | 372,400 |
| Long-term securities holdings | - | 22,831 | 79,320 | - | 102,152 |
| Liabilities to credit institutions | 173,151 | - | - | - | 173,151 |
| EUR thousands | Real Estate | Real Estate | |||
|---|---|---|---|---|---|
| 1 Jan-31 Dec 2019 | Direct | Fund | Other | Unallocated | Total |
| Rental income | 13,348 | - | - | - | 13,348 |
| Property expenses | -1,402 | - | - | - | -1,402 |
| Net operating income | 11,946 | - | - | - | 11,946 |
| Central administration expenses | - | - | - | -3,873 | -3,873 |
| Interest expenses | -2,225 | - | - | - | -2,225 |
| Other financial income and expenses | -308 | - | - | -51 | -359 |
| Profit from property management | 9,413 | - | - | -3,924 | 5,489 |
| Unrealised changes in value of properties | 10,208 | - | - | - | 10,208 |
| Unrealised changes in value of derivatives | -1,006 | - | - | - | -1,006 |
| Unrealised changes in value of investments | - | -243 | 17,985 | - | 17,742 |
| Realised values and dividends from investments | - | 2,530 | 2,873 | - | 5,403 |
| Profit/loss before tax | 18,615 | 2,287 | 20,858 | -3,924 | 37,836 |
| Deferred tax | -2,570 | - | - | - | -2,570 |
| Net profit/loss for the year | 16,045 | 2,287 | 20,858 | -3,924 | 35,266 |
| Investment properties | 290,256 | - | - | - | 290,256 |
| Long-term securities holdings | - | 21,812 | 66,897 | - | 88,709 |
| Liabilities to credit institutions | 137,771 | - | - | - | 137,771 |
LONG-TERM SECURITIES HOLDINGS
Tables below reflect the long-term securities holdings measured at fair value in level 3. Segment "Real Estate Fund" consist the holdings in East Capital Property Fund II (end of year 2019 and during year 2020) and segment "Other" consist the holdings in JSC Melon Fashion Group. The asset of properties in the fund are normally valued internally by fund manager at quarterly basis and externally at year end. JSC Melon Fashion Group is valued internally by Eastnine. Derivatives are measured continuously at fair value according to level 2.
| Real Estate | |||
|---|---|---|---|
| Changes in long-term securities holdings measured at fair value in level 3, EUR thousands | Fund | Other | Total |
| Opening balance 1 January 2019 | 43,986 | 48,912 | 92,898 |
| Purchases/additions | 1,982 | - | 1,982 |
| Divestments/reductions | -25,090 | - | -25,090 |
| Unrealised changes in values recognised net in profit/loss | -243 | 17,985 | 17,742 |
| Realised changes in values recognised net in profit/loss | 1,177 | - | 1,177 |
| Closing balance 31 December 2019 | 21,812 | 66,897 | 88,709 |
| Unrealised changes in values recognised net in profit/loss | 1,019 | 12,423 | 13,443 |
| Closing balance 31 December 2020 | 22,831 | 79,320 | 102,152 |
VALUATION ASSUMPTIONS
| 2020 | |
|---|---|
| Investment properties | 31 Dec |
| Long-term inflation, % | 1.5 |
| Average discount rate, % | 7.2 |
| Weighted yield requirement, % | 5.8 |
| Long-term vacancy rate, % | 4.5 |
| Long-term securities holdings | Segment | Valuation method1 | Valuation assumptions1 |
|---|---|---|---|
| East Capital Baltic Property Fund II | Real Estate Fund | DCF | WACC 7-9%, yield requirement 6-8%. |
| Long-term growth 3.5%, long-term operating margin | |||
| 8.3%, WACC 14,6%, minority and liquidity discount of | |||
| JSC Melon Fashion Group | Other | DCF | 25% is applied. |
1Discounted cash flow model (DCF), weighted average cost of capital (WACC).
SENSITIVITY ANALYSIS
31 December 2020
| Investment properties, EUR thousands | Assumptions | Real Estate Direct | |
|---|---|---|---|
| Market rental level, % | +/- 5.0 | 17,817 | -17,357 |
| Long-term floor space occupancy rate, percentage points | +/- 1.0 | 5,100 | -5,117 |
| Yield requirement, percentage points | +/- 0.25 | -18,764 | 20,783 |
31 December 2020
| Long-term securities holdings, EUR thousands Assumptions |
Real Estate Fund | Other | |||
|---|---|---|---|---|---|
| Yield requirement, percentage points | +/- 0.5 | -1,436 | 1,640 | - | - |
| Weighted average cost of capital, percentage points | +/- 0.5 Real Estate Fund +/- 1.0 Other |
-1,454 | 1,505 | -6,949 | 8,340 |
| Long-term growth, percentage points | +/- 0.4 | - | - | 1,977 | -1,840 |
| Long-term operating margin, percentage points | +/- 0.5 | - | - | 3,165 | -3,164 |
Market risks, EUR thousands
| Effect on profit/loss | 2020 | 2019 | 2020 | 2019 | ||
|---|---|---|---|---|---|---|
| and equity | Change, % | 31 Dec | 31 Dec | Cash flow and current earning | 31 Dec | 31 Dec |
| Currency rate, EUR/RUB | +/- 10 | 7,932 | 6,690 | Market interest rate, +/- 50 bps | +87 / -87 | +33 / -88 |
| Value of Real Estate Fund and Other |
+/- 10 | 10,215 | 8,871 | Market interest rate, +/- 100 bps | -107 / -173 | -115 / -176 |
Assets and debts of foreign currency, EUR thousands
| Cash and liabilities | 2020 31 Dec |
2019 31 Dec |
Long-term securities holdings1 | 2020 31 Dec |
2019 31 Dec |
|---|---|---|---|---|---|
| Currency in SEK | 270 | 82 | Currency in ruble (RUB) | 79,320 | 66,897 |
| Lease liabilities in SEK | 468 | 567 | |||
| 1Holdings in JSC Melon Fashion Group. |
25
INCOME STATEMENT - PARENT COMPANY
| 2020 | 2019 | 2020 | 2019 | |
|---|---|---|---|---|
| EUR thousands | Jan-Dec | Jan-Dec | Oct-Dec | Oct-Dec |
| Other income | 1,738 | 74 | 435 | 8 |
| Central administration expenses | -3,104 | -3,210 | -788 | -916 |
| Operating profit/loss | -1,366 | -3,136 | -354 | -908 |
| Profit/loss from shares in group companies | - | -16 | - | -1 |
| Unrealised changes in value of investments | 12,423 | 17,985 | 22,139 | 12,825 |
| Dividend received from investments | - | 2,873 | - | 1,940 |
| Financial income | 1,381 | 1,383 | 347 | 348 |
| Financial expenses | -84 | -52 | -52 | -29 |
| Profit/loss before tax | 12,355 | 19,037 | 22,080 | 14,175 |
| Tax | - | - | - | - |
| Net profit/loss for the period | 12,355 | 19,037 | 22,080 | 14,175 |
BALANCE SHEET - PARENT COMPANY
| 2020 | 2019 | |
|---|---|---|
| EUR thousands | 31 Dec | 31 Dec |
| ASSETS | ||
| Fixed assets | ||
| Right-of-use asset, leaseholds | 491 | 596 |
| Equipment | 70 | 88 |
| Shares in group companies | 142,447 | 143,433 |
| Long-term securities holdings | 79,320 | 66,897 |
| Loans to group companies | 27,527 | 27,527 |
| Total non-current assets | 249,856 | 238,541 |
| Current assets | ||
| Other current assets | 1,398 | 2,818 |
| Cash and cash equivalents | 10,995 | 3,038 |
| Total current assets | 12,393 | 5,856 |
| TOTAL ASSETS | 262,248 | 244,396 |
| EQUITY AND LIABILITIES | ||
| Equity | ||
| Restricted capital | ||
| Share capital | 3,660 | 3,660 |
| Unrestricted capital | ||
| Share premium reserve | 257,848 | 252,252 |
| Retained earnings including net profit/loss for the year | -491 | -12,845 |
| Total equity | 261,017 | 243,066 |
| Non-current liabilities | ||
| Lease liability | 468 | 567 |
| Other non-current liabilites | 113 | 63 |
| Total non-current liabilities | 581 | 631 |
| Current liabilities | ||
| Other liabilities | 155 | 242 |
| Accrued expenses and deferred income | 496 | 457 |
| Total current liabilities | 651 | 699 |
| TOTAL EQUITY AND LIABILITIES | 262,248 | 244,396 |
QUARTERLY OVERVIEW
INCOME STATEMENT
| EUR thousands | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 |
|---|---|---|---|---|---|---|---|---|
| Rental income | 5,251 | 4,993 | 4,467 | 4,475 | 4,161 | 3,142 | 3,099 | 2,947 |
| Property expenses | -267 | -510 | -480 | -431 | -410 | -347 | -387 | -258 |
| Net operating income | 4,983 | 4,483 | 3,987 | 4,044 | 3,751 | 2,795 | 2,712 | 2,689 |
| Central administration expenses | -834 | -992 | -865 | -824 | -1,184 | -826 | -936 | -927 |
| Interest expenses | -1,029 | -959 | -852 | -863 | -790 | -498 | -526 | -411 |
| Other financial income and expenses | -59 | -14 | -100 | -95 | -78 | -101 | -109 | -72 |
| Profit from property management | 3,061 | 2,519 | 2,170 | 2,262 | 1,699 | 1,370 | 1,141 | 1,279 |
| Unrealised changes in values: | ||||||||
| Properties | 14,997 | -198 | 5,322 | -2,738 | 3,914 | 2,810 | 3,483 | - |
| Derivatives | -109 | -12 | -426 | -235 | 702 | -311 | -740 | -656 |
| Investments | 21,981 | 9,139 | 3,605 | -21,283 | 11,918 | 1,782 | 760 | 4,459 |
| Realised values and dividends from investments | 640 | - | - | - | 2,588 | 22 | 1,595 | 22 |
| Profit before tax | 40,570 | 11,448 | 10,671 | -21,994 | 20,821 | 5,673 | 6,239 | 5,103 |
| Deferred tax | -3,066 | -285 | -931 | -259 | -1,246 | -604 | -575 | -146 |
| Net profit/loss for the period | 37,504 | 11,163 | 9,740 | -22,253 | 19,575 | 5,069 | 5,664 | 4,957 |
BALANCE SHEET - CONDENSED
| 2020 | 2020 | 2020 | 2020 | 2019 | 2019 | 2019 | 2019 | |
|---|---|---|---|---|---|---|---|---|
| EUR thousands | 31 Dec | 30 Sep | 30 Jun | 31 Mar | 31 Dec | 30 Sep | 30 Jun | 31 Mar |
| Investment properties | 372,400 | 356,940 | 336,200 | 288,020 | 290,256 | 203,276 | 199,882 | 195,972 |
| Long-term securities holdings | 102,152 | 80,170 | 71,031 | 67,426 | 88,709 | 101,881 | 98,117 | 97,357 |
| Other assets | 3,395 | 8,541 | 13,077 | 3,831 | 3,951 | 2,595 | 1,628 | 1,548 |
| Cash and cash equivalents | 24,278 | 13,804 | 21,688 | 43,883 | 37,406 | 40,596 | 42,772 | 43,794 |
| TOTAL ASSETS | 502,225 | 459,456 | 441,996 | 403,160 | 420,322 | 348,348 | 342,399 | 338,670 |
| Shareholders' equity | 309,942 | 261,502 | 250,253 | 245,917 | 268,192 | 248,583 | 243,480 | 242,300 |
| Long-term liabilities to credit institutions | 153,208 | 168,568 | 159,338 | 137,907 | 132,571 | 81,628 | 84,297 | 84,297 |
| Current liabilities to credit institutions | 19,943 | 6,111 | 5,783 | 5,200 | 5,200 | 3,560 | 1,780 | 2,670 |
| Other liabilities | 19,131 | 23,275 | 26,622 | 14,136 | 14,359 | 14,577 | 12,842 | 9,402 |
| TOTAL EQUITY AND LIABILITIES | 502,225 | 459,456 | 441,996 | 403,160 | 420,322 | 348,348 | 342,399 | 338,670 |
QUARTERLY KEY FIGURES
| PROPERTY-RELATED | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 |
|---|---|---|---|---|---|---|---|---|
| Leasable area, sq.m. thousand | 121.0 | 121.1 | 113.9 | 99.5 | 99.5 | 74.5 | 74.5 | 74.9 |
| Number of properties | 10 | 11 | 10 | 9 | 9 | 6 | 6 | 6 |
| Investment properties, EURk | 372,400 | 356,940 | 336,200 | 288,020 | 290,256 | 203,276 | 199,882 | 195,972 |
| Surplus ratio, % | 95 | 90 | 89 | 90 | 90 | 89 | 88 | 91 |
| Floor space occupancy rate, % | 92.6 | 94.2 | 96.1 | 95.7 | 92.7 | 90.2 | 87.7 | 92.0 |
| Average rent, EUR/sq.m./month | 14.9 | 14.8 | 14.9 | 15.0 | 14.7 | 14.7 | 14.7 | 14.8 |
| WAULT, years | 4.4 | 4.6 | 4.7 | 4.9 | 5.0 | 3.0 | 3.3 | 2.8 |
| Average yield requirement, % | 5.8 | 6.1 | 6.1 | 6.1 | - | - | - | - |
| Environmentally certified properties, % of sq.m. | 87 | 79 | 84 | 72 | 72 | 75 | 75 | 75 |
| FINANCIAL | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 |
| Rental income, EURk | 5,251 | 4,993 | 4,467 | 4,475 | 4,161 | 3,142 | 3,099 | 2,947 |
| Net operating income, EURk | 4,983 | 4,483 | 3,987 | 4,044 | 3,751 | 2,795 | 2,712 | 2,689 |
| Profit from property management, EURk | 3,061 | 2,519 | 2,170 | 2,262 | 1,699 | 1,370 | 1,141 | 1,279 |
| Loan-to-value ratio, % | 36 | 40 | 41 | 40 | 36 | 28 | 29 | 30 |
| Loan-to-value ratio, properties (LTV), % | 46 | 49 | 49 | 50 | 47 | 42 | 43 | 44 |
| Capital tie-up period on Liabilities to credit institutions, year |
3.0 | 3.2 | 3.1 | 3.3 | 3.5 | 4.0 | 4.2 | 4.5 |
| Interest tie-up period on Liabilities to credit institutions, year |
2.3 | 2.5 | 2.5 | 2.8 | 3.1 | 3.9 | 4.2 | 4.5 |
| Debt ratio, multiple | 12.4 | 14.1 | 15.2 | 15.0 | 17.1 | 13.0 | 14.1 | 16.3 |
| Equity/asset ratio, % | 62 | 57 | 57 | 61 | 64 | 71 | 71 | 72 |
| Interest coverage ratio, multiple | 4.0 | 3.6 | 3.5 | 3.6 | 3.2 | 3.8 | 3.2 | 4.1 |
| Average interest rate, % | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.4 |
| Return on equity Real Estate Direct, % | 35.9 | 7.5 | 19.2 | -0.4 | 20.3 | 15.7 | 16.7 | 6.2 |
| Return on equity, % | 52.5 | 17.5 | 15.7 | -34.6 | 30.3 | 8.2 | 9.3 | 8.2 |
| Cashflow per share from operating activities, EUR | 0.20 | 0.13 | 0.06 | 0.08 | 0.22 | 0.06 | 0.12 | -0.01 |
| Cashflow per share, EUR | 0.49 | -0.37 | -1.05 | 0.31 | -0.15 | -0.10 | -0.05 | -1.00 |
| SHARE-RELATED | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 |
| Equity, EURk | 309,942 | 261,502 | 250,253 | 245,917 | 268,192 | 248,583 | 243,480 | 242,300 |
|---|---|---|---|---|---|---|---|---|
| Long-term net asset value (LT-NAV), EURk | 323,542 | 271,927 | 260,381 | 254,689 | 276,470 | 256,316 | 250,298 | 247,804 |
| Market capitalisation, EURk | 275,527 | 225,289 | 236,472 | 212,439 | 276,546 | 225,322 | 213,772 | 229,466 |
| Market capitalisation, SEK thousand | 2,768,633 | 2,364,465 | 2,474,440 | 2,309,477 | 2,905,881 | 2,415,223 | 2,258,720 | 2,389,844 |
| Number of shares issued at period end, thousand |
22,370 | 22,370 | 22,370 | 22,370 | 22,370 | 22,370 | 22,370 | 22,370 |
| Number of shares issued at period end, adjusted for repurchased shares, thousand |
22,149 | 21,149 | 21,149 | 21,149 | 21,149 | 21,149 | 21,149 | 21,149 |
| Weighted average number of shares, adjusted for repurchased shares, thousand |
21,627 | 21,149 | 21,149 | 21,149 | 21,187 | 21,200 | 21,227 | 21,305 |
| Earnings per share, EUR | 1.73 | 0.53 | 0.46 | -1.05 | 0.93 | 0.24 | 0.27 | 0.23 |
| Profit from property management per share, EUR | 0.14 | 0.12 | 0.10 | 0.11 | 0.08 | 0.06 | 0.05 | 0.06 |
| Dividend per share, EUR1 | 0.30 | - | - | - | 0.26 | - | - | - |
| Dividend per share, SEK1 | 3.00 | - | - | - | 2.70 | - | - | - |
| Equity per share, EUR | 14.0 | 12.4 | 11.8 | 11.6 | 12.7 | 11.8 | 11.5 | 11.5 |
| Equity per share, SEK | 141 | 130 | 124 | 126 | 133 | 126 | 122 | 119 |
| Long-term net asset value per share, EUR | 14.6 | 12.9 | 12.3 | 12.0 | 13.1 | 12.1 | 11.8 | 11.7 |
| Long-term net asset value per share, SEK | 147 | 135 | 129 | 131 | 137 | 130 | 125 | 122 |
| Share price, EUR | 12.4 | 10.7 | 11.2 | 10.0 | 13.1 | 10.7 | 10.1 | 10.8 |
| Share price, SEK | 125.00 | 111.80 | 117.00 | 109.20 | 137.40 | 114.20 | 106.80 | 113.00 |
| OTHER | Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 |
| EUR/SEK | 10.05 | 10.50 | 10.46 | 10.87 | 10.51 | 10.72 | 10.57 | 10.41 |
| EUR/RUB | 90.50 | 91.00 | 80.03 | 85.73 | 69.72 | 70.73 | 71.83 | 73.77 |
1Proposed dividend for 2020, SEK 3.00 per share corresponding to EUR 0.30 per share.
INTERPRETATION OF KEY FIGURES
| Q4 2020 | Q3 2020 | Q2 2020 | Q1 2020 | Q4 2019 | Q3 2019 | Q2 2019 | Q1 2019 | |
|---|---|---|---|---|---|---|---|---|
| Rental income | 5,251 | 4,993 | 4,467 | 4,475 | 4,161 | 3,142 | 3,099 | 2,947 |
| Net operating income | 4,983 | 4,483 | 3,987 | 4,044 | 3,751 | 2,795 | 2,712 | 2,689 |
| Surplus ratio, % | 95 | 90 | 89 | 90 | 90 | 89 | 88 | 91 |
| Investment properties and | ||||||||
| Long-term securities holdings | 474,552 | 437,110 | 407,231 | 355,446 | 378,965 | 305,157 | 297,999 | 293,328 |
| Liabilities to credit institutions | 173,151 | 174,679 | 165,121 | 143,107 | 137,771 | 85,187 | 86,077 | 86,967 |
| Loan-to-value ratio, % | 36 | 40 | 41 | 40 | 36 | 28 | 29 | 30 |
| Investment properties | 372,400 | 356,940 | 336,200 | 288,020 | 290,256 | 203,276 | 199,882 | 195,972 |
| Liabilities to credit institutions | 173,151 | 174,679 | 165,121 | 143,107 | 137,771 | 85,187 | 86,077 | 86,967 |
| Loan-to-value ratio, properties (LTV), % | 46 | 49 | 49 | 50 | 47 | 42 | 43 | 44 |
| Equity | 309,942 | 261,502 | 250,253 | 245,917 | 268,192 | 248,583 | 243,480 | 242,300 |
| Add back derivatives | 2,745 | 2,636 | 2,624 | 2,198 | 1,963 | 2,665 | 2,353 | 1,614 |
| Add back deferred tax | 10,855 | 7,789 | 7,504 | 6,574 | 6,315 | 5,069 | 4,465 | 3,891 |
| Long-term net asset value, EURk | 323,542 | 271,927 | 260,381 | 254,689 | 276,470 | 256,316 | 250,298 | 247,804 |
| Net operating income | 17,497 | 16,265 | 14,577 | 13,301 | 11,946 | 10,316 | 9,625 | 8,947 |
| Central administration expenses | -3,515 | -3,865 | -3,699 | -3,770 | -3,873 | -3,744 | -3,539 | -3,611 |
| Total | 13,982 | 12,400 | 10,878 | 9,531 | 8,074 | 6,572 | 6,086 | 5,336 |
| Liabilities to credit institutions | 173,151 | 174,679 | 165,121 | 143,107 | 137,771 | 85,187 | 86,077 | 86,967 |
| Debt ratio, multiple | 12.4 | 14.1 | 15.2 | 15.0 | 17.1 | 13.0 | 14.1 | 16.3 |
| Profit from property management | 3,061 | 2,519 | 2,170 | 2,262 | 1,699 | 1,370 | 1,141 | 1,279 |
| Interest expenses | 1,029 | 959 | 852 | 863 | 790 | 498 | 526 | 411 |
| Profit before interest expenses | 4,090 | 3,478 | 3,022 | 3,125 | 2,489 | 1,868 | 1,667 | 1,690 |
| Interest coverage ratio, multiple | 4.0 | 3.6 | 3.5 | 3.6 | 3.2 | 3.8 | 3.2 | 4.1 |
| Net profit Real Estate Direct, annualised | 63,078 | 12,190 | 28,004 | -586 | 25,129 | 16,376 | 17,003 | 5,673 |
| Average equity Real Estate Direct | 175,520 | 162,530 | 146,071 | 138,342 | 124,092 | 104,349 | 101,870 | 91,975 |
| Return on equity Real Estate Direct, % | 35.9 | 7.5 | 19.2 | -0.4 | 20.3 | 15.7 | 16.7 | 6.2 |
| Net profit, annualised | 150,016 | 44,652 | 38,960 | -89,012 | 78,302 | 20,277 | 22,657 | 19,828 |
| Average equity | 285,722 | 255,877 | 248,085 | 257,055 | 258,388 | 246,031 | 242,890 | 241,560 |
| Return on equity, % | 52.5 | 17.5 | 15.7 | -34.6 | 30.3 | 8.2 | 9.3 | 8.2 |
Q4
Definitions and glossary
Eastnine applies European Securities and Markets Authority (ESMA) guidelines on alternative performance measures. According to these guidelines, an alternative performance measure is a financial metric of historical or future earnings performance, financial position, financial results or cash flows, which is not defined or stated in applicable rules for financial reporting (IFRS and the Swedish Annual Accounts Act).
PROPERTY RELATED KEY FIGURES
Average rental income
Average rent at the end of the period.
Lettable area Total area available for letting.
Net letting
Annual rent income from contracts signed, less that of contracts terminated, during the period.
Net operating income Rental income less property expenses.
Occupancy rate, by area Occupied area in relation to lettable area.
Occupancy rate, financial
Contracted annual rent at the end of the period in relation to the rent value.
This indicator is used to facilitate the estimation of rental income for vacant premises and other financial vacancies.
Profit from property management
Earnings before value changes, dividends received and taxes.
Rental income
Debited rents, rental accruals, and rental guarantees less rental discounts.
Rent value
Contracted annual rents which are current at the end of the period with supplements for discounts and estimated market rent for vacant premises.
Surplus ratio
Net operating income in relation to rental income.
Triple-net lease
Lease agreements where the tenant, in addition to the base rent, also pays costs related to the leased area. These costs include operational and maintenance costs, property taxes, site leasehold fees, insurance and property caretaking.
Yield requirement, earning capacity
Net operating income in relation to the investment properties book value, excluding development properties.
Yield requirement, investment properties
The yield requirement is used in valuations and are based on yield rate at end of the period. The yield requirement are estimations of the market return requirement for similar investment objects, with the addition of risks related to real estate, such as geographical location, the condition of the property, and future vacancy risk.
Vacancy rate, by area Vacant area in relation to lettable area.
Vacancy rate, financial
Annual rent for vacant premises at the end of the period in relation to the rent value at the end of the period.
WAULT
Average remaining lease term of lease agreements weighted according to contracted rental income (Weighted Average Unexpired Lease Term).
The indicator shows the risk of future vacancies.
FINANCIAL KEY FIGURES
Average capital tie-up period
Remaining average capital tie-up term for liabilities to credit institutions by the end of the period.
Average fixed interest period
Remaining average fixed interest term for liabilities to credit institutions by the end of the period.
Average interest rate
Average interest rate on the Group's liabilities to credit institutions at the end of the period.
Cash flow per share
Cash flow for the period in relation to weighted average number of issued shares for the period.
Cash flow from operation activities per share
Cash flow from operation activities in relation to weighted average number of issued shares for the period.
Debt coverage ratio
Liabilities to credit institutions at the end of the period in relation to net operating income on a 12-month basis after deduction of central administration expenses on a 12-month basis.
EBITDA
Abbreviation for Earnings Before Interest, Tax, Depreciation and Amortisation.
Equity/asset ratio Equity in relation to total assets.
Interest coverage ratio
Profit from property management, with reversal of interest expenses, in relation to interest expenses.
Loan-to-value ratio,
Liabilities to credit institutions in relation to the sum of investment properties and long-term securities holdings.
Loan-to-value ratio, investment
properties (LTV) Liabilities to credit institutions in relation to investment properties.
Return on equity
Net profit/loss for the quarter, recalculated on a 12-month basis, in relation to average equity.
Return on equity, Real Estate Direct
Net profit/loss for the quarter, recalculated on a 12-month basis, in the Real Estate Direct segment in relation to average equity attributable to the segment.
SHARE-RELATED KEY FIGURES
Earnings per share
Period earnings attributable to equity holders of the Parent Company in relation to the average number of issued shares (excluding shares held in treasury).
Equity
Q4
Total equity.
Equity per share
Equity in relation to the total number of issued shares (excluding shares held in treasury).
Long-term net asset value (LT-NAV)
Total equity with reversal of derivatives and deferred tax liabilities according to the balance sheet.
Long-term net asset value per share
LT-NAV in relation to the number of outstanding shares (excluding shares in treasury).
Profit from property management per share
Profit from property management divided by the average number of shares during the period.
GLOSSARY
Break option
Unilateral option allowing the tenant to terminate the lease agreement prematurely. The clause usually refers to a right on the part of the tenant to terminate a lease without additional rent payments.
Environmental certification system
BREEAM is an abbreviation for Building Research Establishment Environmental Assessment Method.
LEED is an abbreviation for Leadership in Energy and Environmental Design.
Fair value
Fair value is the price at which a property transfer may take place between independent and informed parties which have an interest in the transaction taking place. Fair value is considered to be equal to the acquisition value at the acquisition date, after which the fair value may change over time.
Green lease
Leases where Eastnine and the tenant agrees to actively work for improving the properties/premises environmental performance.
GRESB
Abbreviation for Global Real Estate Sustainability Benchmark.
Gross area
Gross area is the sum of the area of all the floors up to the exterior of the surrounding building sections. The term is used e.g., with regards to property valuations.
ICT
Abbreviation for Information and Communication Technology.
IFRS
Abbreviation for International Financial Reporting Standard. IFRS is an international reporting standard for the preparation of group statements.
Interest derivatives
Agreements for the purchase and sale of interest, the price and conditions of which depend on factors such as time, inflation rates, and market. Derivative agreements are usually entered into in order to ensure predictable interest rate levels for some part or the entirety of the interest-bearing loans. Interest rate swaps are a type of derivative where the value on balance day is zero and which expires without further payment flows.
Net asset value discount/premium
The difference between net asset value and market capitalisation. If market capitalisation is lower than the net asset value, the share is traded with a net asset discount. If the market capitalisation is higher, the share is traded at a premium.
Property
Relates to real estate in possession through ownership or site leaseholds.
Share buy-back
Purchasing of own shares on the stock market. Swedish companies have the option to own up to 10 per cent of their own outstanding shares, given approval from the AGM.
Zero-interest floor
Clause in credit agreements meaning that a negative Euribor interest rate is considered as zero.
Financial calendar
Annual General Meeting 2021: 5 May 2021 Interim report January-March 2021: 5 May 2021 Interim report January-June 2021: 14 July 2021 Interim report January-September 2021: 10 November 2021 Year-end report 2021: 11 February 2022
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The information in this interim report is the information which Eastnine AB is required to disclose under the EU Market Abuse Regulation.
The report was released for publication at 07.00 a.m. on 17 February 2021.
This is a translation of the original Swedish language interim report. In the event of discrepancies, the original Swedish wording shall prevail.
Contact information
Kestutis Sasnauskas, CEO, +46 8 505 977 00 Britt-Marie Nyman, CFO and deputy CEO, +46 70 224 29 35
EASTNINE AB
Kungsgatan 30, Box 7214 SE-103 88 Stockholm, Sweden Tel: +46 8 505 977 00 www.eastnine.com Registration no. 556693-7404