EfTEN Boosts Dividend on Record Cash Flow Despite Property Value Dip

TALLINN, ESTONIA – January 12, 2026 – EfTEN Real Estate Fund AS has announced its strongest operating results in the company's history for 2025, a performance that has prompted its management to propose a significant 8% increase in shareholder dividends. The fund's robust performance, fueled by strategic acquisitions and favorable interest rate movements, stands in contrast to a slight downturn in its property portfolio's valuation, painting a nuanced picture of the Baltic real estate market.

Based on preliminary unaudited results, the fund is set to pay a gross dividend of EUR 1.2 per share. This proposed payout surpasses the dividend policy's baseline calculation, reflecting management's confidence in the fund's record-level free cash flow and strong financial footing heading into the new year.

Operational Strength Drives Record Performance

At the core of EfTEN's successful year is a solid operational foundation. The fund's consolidated rental income grew by 3.1% year-over-year, reaching EUR 32.036 million. This growth was not accidental but the direct result of a targeted investment strategy. The addition of new logistics centers and elderly care facilities to the portfolio proved to be a significant revenue driver, demonstrating the fund's successful diversification into resilient sectors.

In his comments on the results, Fund Manager Viljar Arakas noted, "Excluding revaluations of investment properties, EfTEN Real Estate Fund AS achieved the strongest operating results in its history in 2025." This operational excellence is further reflected in the fund's consolidated EBITDA, which rose by 1.3% to EUR 26.805 million.

Despite a competitive tenant market shaped by modest regional economic growth, EfTEN maintained a low overall vacancy rate of just 3.2% across its portfolio. However, this figure masks a divergence between property segments. The retail and logistics segments performed exceptionally well, with vacancy rates of only 0.4% and 1.4%, respectively. In contrast, the office segment faced greater headwinds, registering a 14.4% vacancy rate, a figure that reflects broader market pressures, particularly in oversupplied markets like Vilnius.

Proactive Financial Management Unlocks Shareholder Value

A key contributor to the fund's record cash flow was its adept management of liabilities. As the pan-European EURIBOR benchmark declined throughout the year, EfTEN saw its interest expenses fall significantly. The weighted average interest rate on the fund’s bank loans decreased to 3.99% by the end of 2025, a substantial 0.9 percentage point drop from the previous year.

This reduction in financing costs dramatically improved the fund's financial health metrics. The debt service coverage ratio (DSCR), a key measure of a company's ability to service its debt, improved to 2.01, up from 1.7 in 2024. Furthermore, the fund’s EBITDA was sufficient to cover its interest expenses by a factor of 4.0, a marked improvement from the 3.0 times coverage a year earlier.

This combination of higher rental income and lower interest payments resulted in an 18% surge in adjusted free cash flow, which totaled EUR 13.1 million for the year. According to the fund's standard dividend policy, this would have supported a dividend of 91 cents per share. However, citing a strong cash balance and favorable refinancing opportunities, management has confidently proposed the higher EUR 1.2 per share dividend. The company also noted that its reliance on bank loan refinancing to fund the dividend payment is lower than it was in the prior year, signaling enhanced organic cash generation.

Looking ahead, the fund is taking proactive steps to shield itself from future interest rate volatility. It has already begun fixing interest rates for parts of its loan portfolio, including one subsidiary that entered an interest rate swap agreement for EUR 11.6 million at a favorable 1.995%. This strategy aims to bring stability and predictability to its future financing costs.

A Signal in the Noise: Property Valuations and Market Headwinds

While operations and cash flow painted a rosy picture, the fund’s year-end property valuation served as a sober reminder of underlying market dynamics. In December, an independent valuation by Colliers International resulted in a EUR 4.005 million, or 1%, decrease in the fair value of EfTEN's real estate portfolio. This adjustment was primarily attributed to the DSV Estonia logistics center, where the anticipated departure of an anchor tenant in late 2026 will likely necessitate future reconstruction and investment to re-lease the premises.

This minor writedown is significant as it reflects broader trends in the Baltic commercial real estate market, which experienced low transaction volumes in 2025. The revaluation at a key asset highlights how tenant risk and lease expirations can impact valuations, even for top-tier properties. This event caused the fund's Net Asset Value (NAV) per share to decrease by 1.9% in December to EUR 20.3217, an impact compounded by the recognition of deferred income tax related to the planned dividend distribution. Without these non-monetary and tax-related items, the fund’s NAV would have increased by 0.8% during the month.

Strategic Portfolio Diversification Pays Off

EfTEN’s 2025 results underscore the success of its long-term diversification strategy. The fund invested a total of EUR 11.3 million into its real estate projects during the year. The allocation of this capital was telling: EUR 6.5 million was directed towards care homes, and EUR 2.5 million was invested in the Paemurru logistics center. These investments in growing, needs-based sectors were the primary engine of the fund's rental income growth.

This strategic focus allowed the fund to effectively counterbalance the softness observed in its office portfolio. By actively managing its asset mix and directing capital towards sectors with strong demand drivers, EfTEN has built a resilient income stream capable of weathering segment-specific challenges.

The fund’s ability to generate record operating profit and deliver a substantial dividend increase, all while navigating a complex market and absorbing a minor valuation adjustment, demonstrates a mature and effective management approach. This performance sets a strong precedent for the fund as it continues to navigate the evolving landscape of Baltic commercial real estate.