Baltic Sea Properties : Quarterly report – Q1 2024

Quarterly report - Q1 2024

Baltic Sea Properties AS

Quarterly report | Q1 2024

About us

Baltic Sea Properties is a Norwegian public listed, open-ended and fully integrated investment company. The company is among the Baltics' leading real estate investors and developers

• owning a diversified cash flow generating portfolio of modern real estate in the logistics, industrial and commercial segments.

Our strategy is to develop long-term relationships with strong clients and to hold high-quality assets in attractive locations. We grow our portfolio by own developments and acquisitions with the objective to maximise shareholder values and the company's dividend capacity.

The property management is conducted through fully-owned subsidiaries by a professional management team with deep knowledge of the Baltic real estate market

2

Baltic Sea Properties ASQuarterly report | Q1 2024

Contents

About us	2
Our Vision, Mission & Values	4
CEO's comment	6
Financial Overview	8
Key figures group	9
Financial results	10
Income From Property Management (IFPM)	11
Financing	12
Financial expenses overview	13
Loan-to-Value (LTV)	14
Net Asset Value (NAV)	15
Consolidated statements	16
Market update from Newsec Baltics	22
Property portfolio	24
Client mix	25
Investment strategy	26
Our development approach	27
Sustainability in development	28
BREEAM certification status	29
Investment projects	30
Development projects	39
Available land	40
Contact	42
Euronext Growth Oslo	44
Appendix 1 - Reconciliation of APM's	45

Disclaimer:

This report has been prepared by Baltic Sea Properties AS in good faith and to our best ability with the purpose to give the company's shareholders updated information about the company's operations and status. This document must not be understood as an offer or encouragement to invest in the company. The financial figures presented are unadited and may thus include discrepancies. Baltic Sea Properties AS further makes reservations that errors may have occurred in its calculations of key figures or in the development of the report which may contribute to an inaccurate impression of the company's status and/or operations. The report also includes descriptions and comments which are based on subjective assumptions and considerations, and thus must not be understood as a guarantee of future events or future profits.

3

Our Vision

Our vision is to be the preferred real estate partner and leading investment company in the region.

We will achieve this by staying true to our mission and values.

Our Mission

Our mission is to foster a great team, to provide high quality and sustainable solutions for our partners, thus creating superior long-term value and returns for our shareholders.

Our Values

• Commitment to our people and their professional development.
• Focusing on innovation and value creation.
• Respect for our social and physical environment.
• Accountability and fairness with our stakeholders.

Baltic Sea Properties AS

Quarterly report | Q1 2024

CEO's comment

Quarterly report Q1 2024 (unaudited)

We are pleased to present our first quarter report,	Commitment to long-term value creation
marking another period of revenue growth and
sustained cash flow development despite a	Above all, our focus remains committed on
challenging real estate market and rising financing	developing high-yielding, sustainable quality
costs. Our EBITDA grew by 3% year-on-year,	assets that deliver long-term returns for our
although income from property management	clients and shareholders. The attractive yield
(IFPM) decreased due to these costs. Notably, our	spread relative to the Nordics, combined with our
Net Asset Value (NAV) has strengthened by 1.84%	strategic initiatives, positions us well to capitalise
(5.85% in NOK) since the end of last year, reflecting	on both high cash yield returns and value growth
a robust operational strategy and resilience in our	potential.
long-term investments.	We are optimistic about our financial results
Operational highlights and development focus
and strategic direction. Our dedicated team,
	resilience in our long-term strategy, and the
Our commitment to expanding and enhancing	current opportunities reassure our confidence
our development pipeline has been exemplified	in achieving significant scale and success in the
by entering into a new development and lease	Baltic real estate market.
agreement with ESO, a subsidiary of the Ignitis
Group, the leading energy and distribution
company in the Baltic region. This agreement,
centered on a strategic 4,340 sqm office and
warehouse complex at "Liepų Parkas" in Klaipėda,
kickstarts an important project within our 16,000
sqm business and retail park. This move, alongside
our expansion project for Rhenus totaling more
than 22 million EUR in investments, showcases
our proactive strategy in pursuing growth through
both owned developments and build-to-suit
projects.	Lars Christian Berger
Strategic review and future growth	CEO
The current high interest rate environment
showcases the necessity of scale in our
operations. We expect EURIBOR to stabilise over
the next 1-2 years, yet it remains clear that rates
will not return to previous lows. In response,
we are undertaking a strategic review with
investment banks Sparebank 1 Markets and Norne
Securities to explore varied growth options. This
strategic initiative, complemented by insights
from our recent investor roadshow, sets the stage
for future announcements. We plan to continue
communicating our progress transparently and
anticipate revealing further details in the coming
weeks.

Baltic Sea Properties AS

Quarterly report | Q1 2024

Large frame | Concept visualisation of Liepų Parkas (retail and business park, Liepų Street, Klaipėda) Small frame | Construction in progress, May 2024

Baltic Sea Properties AS

Quarterly report | Q1 2024

Financial overview

Q1 2024

• Key figures group
• Financial results
• Income From Property Management (IFPM)
• Financing
• Financial expenses overview
• Loan-to-Value(LTV)
• Net Asset Value (NAV)
• Consolidated statements

Please note:

Unless stated otherwise, the financial figures presented in this chapter have been prepared using the same IFRS principles as described in the company's Annual Report 2022 (available for download on balticsea.no). The consolidated statements presented in this quarterly report are however simplified

from the IFRS requirements.

Please note that the quarterly/half-yearly figures in this report are unaudited.

8

Baltic Sea Properties AS

Quarterly report | Q1 2024

Key figures group

Quarterly report Q1 2024 (unaudited)

Per share	31/03/2024	31/12/2023	31/12/2022
Net Asset Value (NAV) in NOK	72.99	68.95	62.11
NAV in EUR	6.25	6.13	5.91
YTD Return NAV incl. dividend (EUR)	1.84%	6.39%	12.11 %
YTD Return NAV incl. dividend (NOK)	5.85%	13.56%	17.95 %
Dividend distributed (NOK)	-	1.60	1.50
Dividend distributed (EUR)	-	0.14	0.15
Last transaction price per date (NOK)	49.4	47.40	50.00
Number of shares issued	6 688 232	6 688 232	6 688 232
EURNOK rate, balance sheet date 1	11.68	11.24	10.51
EURNOK rate, YTD average 2	11.42	11.42	10.10

1. EURNOK rate per balance sheet date is used when converting balance sheet figures.
2. EURNOK YTD average rate is used when converting P&L figures.

Group key figures	31/03/2024	31/12/2023	31/12/2022
Fair value of portfolio (MNOK)	1 170	1 121	1 016
Fair value of portfolio (MEUR)	100.2	99.8	96.7
Value of equity based on NAV - BSP method (MNOK)	487	460	414
Value of equity based on NAV - BSP method (MEUR)	41.7	40.9	39.5
Annualised contracted rent (MNOK)	102.2	93.6	88.4
Annualised contracted rent (MEUR)	8.9	8.3	8.0
Net income from property management (IFPM) (MNOK)	6.6	33.3	29.7
Net income from property management (IFPM) (MEUR)	0.6	2.9	3.0
NOI yield (investment projects)	8.05 %	8.06%	7.88 %
Dividend yield (NAV)	-	2.44%	2.50%
Occupancy rate	100%	100%	99 %
WAULT (years)	9.16	9.1 yrs	9.1 yrs
IBD (incl. mezzanine facility) (NOK)	673	656	604
IBD (incl. mezzanine facility) (EUR)	57.6	58.3	57.4
LTV investment portfolio (incl. mezzanine facility)	57.48%	58.43%	59.42 %
Net LTV (inc. Cash)	55.52%	56.37%	56.95 %
Interest coverage ratio (ICR) - Group	1.71	2.09	2.39
Interest coverage ratio (ICR) - SPV finance	2.11	3.10	4.22

Terms/abbreviations used in this report:

• Fair value of portfolio = valuation of the real estate assets
• NOI = Net operating income from property portfolio (incl.internal property management expenses)
• NOI yield = NOI / Market value of the investment portfolio excluding development land value (land bank).
• Net rent = Income from rental activity from property portfolio minus (-) all unrecovered property expenses (not including internal property management fees).

•	IFPM (Income From Property Management) = Profit/loss before tax excluding depreciations, profit/loss/value movements on properties, realised investments, cur-
	rency and other financial instruments.

• IBD = Interest-Bearing Debt - all outstanding debt to credit institutions and/or other credit facilities
• LTV = Loan to Value ratio
• EBITDA = Earnings before interest, tax, depreciation and amortisation
• WAULT = Weighted average unexpired lease term
• Interest Coverage Ratio (ICR) Group - Group EBITDA/all interest paid

•	Interest Coverage Ratio (ICR) SPV finance - Consolidated EBITDA of real estate subsidiaries/interest paid from real estate finance
•	ROE - Return on Equity	9

Baltic Sea Properties AS

Quarterly report | Q1 2024

Financial results

Quarterly report Q1 2024 (unaudited)

Rental income performance

For the quarter ended 31st March 2024, our rental income reached mEUR 2.07, a 5 % increase over mEUR

1.97 reported at the end of 1st quarter 2023. This growth is primarily due to CPI adjustments on existing leases.

Operational cost and net rent

The direct ownership costs for the 1st quarter of

2024 amounted to mEUR 0.09, on par with the same period last year. The net rent amounted to mEUR 1.97, signifying a sound return on our portfolio, where the majority of owner costs are recovered through the lease agreements.

Administration Costs and Other Operating Expenses

Administration costs for the 1st quarter were mEUR 0.30, largely unchanged from the year before. Other operating expenses increased to mEUR 0.15 from mEUR 0.10 last year.

Net income from property management

Net income from property management (IFPM) stood at mEUR 0.58, which is a decrease from mEUR 0.87 reported per the end of 1st quarter 2023. The reduction in IFPM derives heavily from the significant increase in funding costs.

Fair Value Adjustments and Valuation Methodology

Our valuation of our investment properties increased by mEUR 0.39 during 1st quarter (of which mEUR

0.20 was booked as fair value gains in the profit/loss statement), reflecting new investments completed during the period. We continue to employ the standard Discounted Cash Flow (DCF) method for our valuations, conducted by independent valuators. As of 31.03.2024, the portfolio was valued at mEUR 100.18 (mEUR 99.79 per year-end 2023).

Interest Costs and Finance Expenses

Compared to the 1st quarter of 2023 we experienced higher funding costs, with net realised interest cost

• finance expenses reaching mEUR 0.95, an increase from mEUR 0.62 reported at the 1st quarter 2023. This increase aligns with the rising trend in global interest

rates, yet our financial management still maintains a healthy margin above our covenant thresholds. We predict that interest will remain high throughout 2024, although it is expected to decrease towards the end of the year as inflation across Europe appears to be declining.

Profitability and Taxation

The profit before tax for 1st quarter 2024 was mEUR

0.79. The current tax expense for the period was reduced by mEUR 0.04 during the quarter thanks to the utilisation of deferred tax assets.

Net Asset Value development

Despite the pressures on valuations over time, BSP has managed to maintain a steady return, primarily due to our conservative approach to valuation methodology over a longer period. Across Europe, most real estate companies have been, and continue to be, significantly impacted by declining market valuations on their portfolios. Despite an average 7-8% increase in our valuation yield over the past two years, our portfolio valuation has remained resilient, largely due to CPI-adjusted rent increases and enhancements in some of our lease agreements through professional asset management preserving our nominal values throughout. This strategy has laid a strong foundation for the future, positioning us well to capitalise on what we believe will be improving yields and lower discount rates in the medium to longer term period.

10