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EfTEN Real Estate Fund III announces IPO
A public closed-end alternative investment fund EfTEN Real Estate Fund III AS announces initial public offering of shares with total volume of 3.5 MEUR and 14 euros per share. Additionally, at the same price 87 272 shares are issued directly for fund manager. During subscription period 30.10.2017 9:00 (EET) – 10.11.2017 16:00 (EET) all investors in Estonia with registered securities account at Nasdaq CSD SE Estonian branch can subscribe to the issue. After the IPO, the fund will be listed on Nasdaq Baltic main list, thus becoming tradeable for all investors.
According to EfTEN Real Estate Fund III AS’ fund manager Viljar Arakas, with the IPO the fund is delivering on a promise made to investors when the fund was first established in 2015. “In current market situation, we are lacking investment objects suitable with our conservative investment strategy, and thus we are raising capital only for developing ongoing projects according to fund’s investment policy and for development of new Hortes gardening centre in Tallinn,” added Arakas.
Fund’s main goal and commitment to nearly 300 investors remains the same – providing investors stable dividend yield and capital growth, according to Arakas. Shareholders received net dividends of 29.7 cents per share for 2015 (based on 5 months). For 2016, the fund paid net dividends of 63 cents per share – in total 1.5 MEUR.
From annual free cash flow, the fund pays 80 percent in dividends and annual expected dividend rate is 4 – 8 percent. The decision to pay dividends is made by the annual general meeting. The share price has increased to 14 euros (from 10 euros per share, that was nominal price of initial offering in 2015), corresponding to the fund’s net asset value per share as of September 30, 2017.
According to Arakas, all four partners of fund manager and seven initial investors of EfTEN are among the fund’s current shareholders. In total, 35 percent of the owner’s equity belongs to the shareholders of fund manager.
“It is an important guarantee for the shareholders that we are not only investing money of investors, but we are also investing our own money,” added Arakas, who said that the fund is also planning to keep IPO costs to minimum. Initial public offering is organised by fund manager EfTEN Capital with legal advisor Ellex Raidla. “IPO comes with several fixed costs, however we have promised to our investors to hold the most inexpensive IPO of Tallinn Stock Exchange to date,” said Arakas.
The fund’s gross asset value as of September 30, 2017 is 91.1 MEUR with 40.4 MEUR of owner’s equity. The unleveraged net yield of the current portfolio is 7.7 percent and gross rental income current portfolio yield is 9.1 percent. Leverage makes up 53 percent of total value of real estate investments.
The capital raised with the first two public offerings of shares – in total 24.8 MEUR has been invested in the following investment objects in the Baltic states: Saules Miestas shopping centre, Ulonu business centre in Vilnius and Laisves 3 office building, also DSV logistic centres in Riga, Vilnius and Tallinn.
This Spring EfTEN Real Estate Fund III AS held third public offering of shares and invested the 6.3 MEUR raised into Selver grocery store development in Laagri, Tallinn and Hortes gardening centre also located in Laagri. Additionally, part of the capital raised will pay for reconstruction work at DSV logistics centre in Riga.
The largest investment of the fund is shopping centre Saules Miestas, located in Šiauliai, Lithuania that is valued at 31.1 MEUR as of September 30, 2017, making up of approximately third of the total value of the fund’s assets.
EfTEN Real Estate Fund III AS is the only fund, managed by EfTEN Capital, that makes investments to the large-scale commercial real estate projects accessible to retail investors, characterised by stable, predictable cash flow and capital growth. The Fund’s leverage, according to prospectus confirmed by Estonian Financial Supervision Authority, is limited to a maximum of 65 percent of the total value of real estate acquisition value. Annual expected equity return is 15 percent. EfTEN Real Estate Fund III AS is not a guaranteed fund.
Regulated by Estonian Financial Supervision Authority, EfTEN Real Estate Fund III AS term is 10 years, divided into 3-year investment period, 5 years holding and 2 years for exit. The Fund will become termless after being listed in Baltic Stock Exchange.